UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FormFORM 20-F
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedMarch 31, 20002002
Commission file number1 - 67841-6784
MATSUSHITA DENKI SANGYO KABUSHIKI KAISHA
(Exact name of registrantRegistrant as specified in its charter)
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
(Translation of registrant’sRegistrant’s name into English)
Japan
(Jurisdiction of incorporation or organization)
1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Name of each exchange on which registered | ||
American Depositary Shares* | New York Stock Exchange and Pacific Exchange | ||
Common | New York Stock Exchange and Pacific Exchange |
* American Depositary Shares evidenced by American Depositary Receipts. Each American Depositary Share represents | ||
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
This form contains 87125 pages.
CONTENTS
Page | |||||||
Cautionary Statement Regarding Forward-Looking Statements | 1 | ||||||
PART I | |||||||
Item 1. Identity of Directors, Senior Management and Advisers | 3 | ||||||
Item 2. Offer Statistics and Expected Timetable | 3 | ||||||
Item 3. Key Information | 3 | ||||||
A. Selected Financial Data | 3 | ||||||
B. Capitalization and Indebtedness | 4 | ||||||
C. Reasons for the Offer and Use of Proceeds | 4 | ||||||
D. Risk Factors | 4 | ||||||
Item 4. Information on the Company | 9 | ||||||
A. History and Development of the Company | 9 | ||||||
B. Business Overview | 13 | ||||||
C. Organizational Structure | 24 | ||||||
D. Property, Plants and Equipment | 25 | ||||||
Item 5. Operating and Financial Review and Prospects | 27 | ||||||
A. Operating Results | 27 | ||||||
B. Liquidity and Capital Resources | 35 | ||||||
C. Research and Development | 37 | ||||||
D. Trend Information | 38 | ||||||
E. Accounting Principles | 40 | ||||||
Item 6. Directors, Senior Management and Employees | 44 | ||||||
A. Directors and Senior Management | 44 | ||||||
B. Compensation | 50 | ||||||
C. Board Practices | 50 | ||||||
D. Employees | 52 | ||||||
E. Share Ownership | 53 | ||||||
Item 7. Major Shareholders and Related Party Transactions | 55 | ||||||
A. Major Shareholders | 55 | ||||||
B. Related Party Transactions | 56 | ||||||
C. Interests of Experts and Counsel | 56 |
Page | |||||||
Item 8. Financial Information | 56 | ||||||
A. Consolidated Statements and Other Financial Information | 56 | ||||||
B. Significant Changes | 58 | ||||||
Item 9. The Offer and Listing | 58 | ||||||
A. Offer and Listing Details | 58 | ||||||
B. Plan of Distribution | 59 | ||||||
C. Markets | 59 | ||||||
D. Selling Shareholders | 59 | ||||||
E. Dilution | 60 | ||||||
F. Expenses of the Issue | 60 | ||||||
Item 10. Additional Information | 60 | ||||||
A. Share Capital | 60 | ||||||
B. Memorandum and Articles of Association | 60 | ||||||
C. Material Contracts | 69 | ||||||
D. Exchange Controls | 69 | ||||||
E. Taxation | 70 | ||||||
F. Dividends and Paying Agents | 73 | ||||||
G. Statement by Experts | 73 | ||||||
H. Documents on Display | 73 | ||||||
I. Subsidiary Information | 74 | ||||||
Item 11. Quantitative and Qualitative Disclosures about Market Risk | 74 | ||||||
Item 12. Description of Securities Other than Equity Securities | 76 | ||||||
PART II | |||||||
Item 13. Defaults, Dividend Arrearages and Delinquencies | 77 | ||||||
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds | 77 | ||||||
Item 15. [ Reserved ] | 77 | ||||||
Item 16. [ Reserved ] | 77 | ||||||
PART III | |||||||
Item 17. Financial Statements | 78 | ||||||
Item 18. Financial Statements | 124 | ||||||
Item 19. Exhibits | 124 |
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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Outstanding as of | ||||||||
March 29, 2002 | March 28, 2002 | |||||||
Title of Class | ||||||||
(Japan Time) | (New York Time) | |||||||
Common Stock | ||||||||
American Depositary Shares, each | ||||||||
representing |
Indicate by check mark whether the Company (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].
Indicate by check mark which financial statement item the Company has elected to follow.
Item 17. [X] Item 18. [ ].
All information contained in this Report is as of March 31, 20002002 or for the year ended March 31, 20002002 (fiscal 2000)2002) unless the context otherwise indicates.
The noon buying rate for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York on July 17, 20008, 2002 was 108.53118.66 yen = U.S.$1.
Cautionary Statement Regarding Forward-Looking Statements
AnyThis annual report includes forward–looking statements with respect to Matsushita’s current plans, estimates, strategies(within the meaning of Section 27A of the U.S. Securities Act of 1933 and beliefs in this Annual Report, other than thoseSection 21E of historical fact, are forward-looking statementsthe U.S. Securities Exchange Act of 1934) about the future performance of Matsushita and its Groupgroup companies which(the Matsushita Group). To the extent that statements in this annual report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on management’sthe current assumptions and beliefs of the Matsushita Group in light of the information currently available to it, and involve known and unknown risks, uncertainties, and uncertainties. Actual eventsother factors. Such risks, uncertainties and other factors may cause the Matsushita Group’s actual results, may differperformance, achievements or financial position to be materially different from those anticipatedany future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Matsushita undertakes no obligation to publicly update any forward-looking statements after the date of this annual report (July 2002). Investors are advised to consult any further disclosures by Matsushita in these statements.its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.
Potential
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The risks, uncertainties and uncertaintiesother factors referred to above include, but are not limited to, economic conditions, such asparticularly consumer spending and privatecorporate capital expenditures; trendsexpenditures in major economies in the world, including Japan, the United States, Europe, Japan and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; currency exchange rate fluctuations, notably between the yen, the U.S. dollar, the euro,Euro, Asian currencies and other currencies in which the Matsushita Group operates its businessbusinesses, or in which Matsushita’s assets and liabilities of the Matsushita Group are denominated; direct and indirect restrictions imposed by other countries; fluctuations in market pricesthe ability of securities in whichthe Matsushita has holdings; and Matsushita’s ability to maintain its strength in many product and geographical areas, and Matsushita’s abilityGroup to respond to rapid technological changes through such means asand changing consumer preferences with timely and cost-effective introductions of new product introductions,products in a marketmarkets that isare highly competitive in terms of both price and technology, which is characteristictechnology; the ability of the industryMatsushita Group to realize expected benefits of various restructuring activities in its business and organization, including the share exchanges with five subsidiaries currently in progress; the ability of the Matsushita Group to achieve its business objectives through joint ventures and other collaborative agreements with other companies; the ability of the Matsushita Group to maintain competitive strength in many product and geographical areas; any changes in the Matsushita Group’s financial and operational position or business environment due to its business restructuring; current and potential, direct and indirect trade restrictions imposed by other countries; and fluctuations in market prices of securities and other assets in which the Company primarily belongs.Matsushita Group has holdings, as well as future changes or revisions to accounting policies, or accounting rules.
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PART I
Item 1. DescriptionIdentity of BusinessDirectors, Senior Management and Advisers
GENERALNot applicable
Matsushita Electric Industrial Co., Ltd. (hereinafter, unless the context otherwise requires, “Matsushita” or the “Company” refers to Matsushita Electric Industrial Co., Ltd.Item 2. Offer Statistics and its consolidated subsidiaries as a group) is one of the world’s leading producers of electronic and electric products.Expected Timetable
The Company was incorporated in Japan on December 15, 1935 under the laws of Japan as Matsushita Denki Sangyo Kabushiki Kaisha as the successor to an unincorporated enterprise founded in 1918 by the late Konosuke Matsushita. Mr. Matsushita led the Company with his corporate philosophy of contributing to the peace, happiness and prosperity of mankind through the supply of quality consumer goods. The Company’s business expanded rapidly with the recovery and growth of the Japanese economy after World War II, as it met rising demand for consumer electric and electronic products, starting with washing machines, black-and-white television sets (TVs) and refrigerators. Matsushita continued to grow during the following decades by expanding its product range to include color TVs, hi-fi components, air conditioners, video tape recorders, industrial equipment and information and communications equipment, as well as electronic components. Overseas sales and production expansion were also significant factors for the growth in these decades.Not applicable
Matsushita currently offers a comprehensive range of products, systems and components for consumer, business and industrial use based on sophisticated electronics and precision technology. Most of the Company’s products are marketed under “Panasonic,” “National” and “Technics” brand names, with some of its subsidiaries using brand names such as “Quasar,” “Victor” and “JVC.”Item 3. Key Information
In the 1990s, Matsushita placed increasing emphasis on technological development and the use of advanced electronics technology in every phase of life, thus steering the Company to achieve further growth in the next century. In particular, the Company has been expanding its development activities in such areas as next-generation audiovisual (AV) equipment, multimedia products, and advanced electronic components and devices, many items of which incorporate digital technology. Its current priority product areas include digital television systems, semiconductors, mobile communications equipment, optical discs and display devices, all of which form the basis for growth in the evolving digital networking age.A. Selected Financial Data
Yen (billions), except per share amounts and yen exchange rates | ||||||||||||||||||||
Fiscal year ended March 31, | ||||||||||||||||||||
2002 | 2001 | 2000 | 1999 | 1998 | ||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Net sales | 6,877 | 7,682 | 7,299 | 7,640 | 7,891 | |||||||||||||||
Income (loss) before income taxes | (548 | ) | 101 | 219 | 202 | 356 | ||||||||||||||
Net income (loss) | (431 | ) | 42 | 100 | 24 | 99 | ||||||||||||||
Per common share: | ||||||||||||||||||||
Net income (loss): | ||||||||||||||||||||
Basic | (207.65 | ) | 19.96 | 48.35 | 11.60 | 47.04 | ||||||||||||||
Diluted | (207.65 | ) | 19.56 | 46.36 | 11.58 | 44.01 | ||||||||||||||
Dividends | 12.50 | 12.50 | 14.00 | 12.50 | 13.00 | |||||||||||||||
($0.100 | ) | ($0.116 | ) | ($0.125 | ) | ($0.097 | ) | ($0.107 | ) | |||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Total assets | 7,627 | 8,156 | 7,955 | 8,055 | 8,661 | |||||||||||||||
Long-term debt | 692 | 542 | 644 | 709 | 690 | |||||||||||||||
Stockholders’ equity | 3,243 | 3,773 | 3,684 | 3,642 | 3,854 | |||||||||||||||
Common stock | 259 | 211 | 210 | 209 | 209 | |||||||||||||||
Number of shares | ||||||||||||||||||||
issued at year-end (thousands) | 2,138,515 | 2,079,573 | 2,062,671 | 2,062,345 | 2,112,318 | |||||||||||||||
Yen exchange rates per U.S. dollar: | ||||||||||||||||||||
Year-end | 132.70 | 125.54 | 102.73 | 118.43 | 133.29 | |||||||||||||||
Average | 125.05 | 110.60 | 111.35 | 128.19 | 122.78 | |||||||||||||||
High | 115.89 | 104.19 | 101.53 | 108.83 | 111.42 | |||||||||||||||
Low | 134.77 | 125.54 | 124.45 | 147.14 | 133.99 |
Yen exchange rates for | Jan. | Feb. | Mar. | Apr. | May | Jun. | ||||||||||||||||||
each month during the | 2002 | 2002 | 2002 | 2002 | 2002 | 2002 | ||||||||||||||||||
previous six months: | ||||||||||||||||||||||||
High | 130.93 | 132.26 | 127.07 | 128.13 | 123.08 | 119.38 | ||||||||||||||||||
Low | 134.64 | 134.77 | 133.46 | 133.40 | 128.66 | 125.64 |
In December 1990, the Company acquired MCA INC. (MCA), a leading U.S. entertainment company, for approximately U.S.$6.1 billion.
In May 1993, the Company and N.V. Philips’ Gloeilampenfabrieken, now Koninklijke Philips Electronics N.V. (Philips), terminated their joint venture company, Matsushita Electronics Corporation (MEC), and the Company acquired Philips’ 35% equity share in MEC for 185 billion yen, thus making MEC a wholly-owned subsidiary.
In June 1995, the Company sold an 80% equity interest in MCA, now named Universal Studios, Inc., to The Seagram Company Ltd. for approximately U.S.$5.7 billion, leaving the Company with a minority interest.
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In April 1997, the Matsushita parent company established a new organizational structure, setting up four internal divisional companies — responsible for AVC (audiovisual and computer products), home appliances and household equipment, air conditioners, and electric motors — by grouping a majority of its some 50 product divisions. This step was taken in order to facilitate strategic planning, effective decision making and more efficient allocation of resources across a broader range than that afforded by each single product division.
Notes: | 1. | Dividends per share reflect those paid during each fiscal year. The dollar amounts of the dividends per share have been computed at the exchange rates prevailing on the respective payment dates. | ||
2. | Beginning in fiscal 2001, the Company adopted Statements of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and accordingly, prior year figures have been restated to reflect this change. | |||
3. | Fiscal 1999 and 1998 net income represent amounts after subtracting the impact of approximately 42 billion yen and 28 billion yen, respectively, attributable to adjustments of net deferred tax assets to reflect reductions in Japan’s corporate income tax rate. |
In March 1998, the Company announced a package of new management initiatives aimed at better sharing interests with shareholders. As part of this package, management implemented with approval at the annual shareholders’ meeting in late June 1998, repurchase of 50 million shares of the parent company’s common stock from the stock market for retirement, spending approximately 99 billion yen of retained earnings during fiscal 1999. At the same time, as an incentive to Board members and employees toward the enhancement of corporate value, the parent company introduced stock option plans for Board members and select senior executives, granting them rights to purchase 2,000 to 10,000 common shares each (similar option plans have been implemented in fiscal 2000 and 2001), and established a stock-price-linked remuneration plan, under which modest cash payments are to be offered once a year in addition to ordinary salary and bonus payments to employees manager-level or above (effective through fiscal 2001).
B. | Capitalization and Indebtedness | |
Not applicable |
In October 1999, EPCOS AG, a German electronic components joint venture of the Company and Siemens AG of Germany, had its initial public offering, listing its shares on German and U.S. stock exchanges. Following EPCOS AG’s public offering, Matsushita’s 45% (held by a subsidiary) and Siemens AG’s 55% holdings in EPCOS AG were reduced to nearly 12.5%, respectively. Matsushita realized a 59 billion yen gain from the sale of its shares in EPCOS AG.
C. | Reasons for the Offer and Use of Proceeds | |
Not applicable |
On April 1, 2000, the Company made Matsushita Refrigeration Company and Wakayama Precision Company wholly-owned subsidiaries, by means of share exchanges. As a result of the share exchanges, the Company issued a total of 16,321,187 shares of its common stock to shareholders of the respective companies.
D. | Risk Factors | |
Matsushita Electric Industrial Co., Ltd. (hereinafter, unless the context otherwise requires, “Matsushita” or the “Company” refers to Matsushita Electric Industrial Co., Ltd. and its consolidated subsidiaries as a group), best known for its brand names, such as “Panasonic” and “National,” is one of the world’s leading manufacturers of electronic and electric products for a wide range of consumer, business and industrial uses, as well as a wide variety of components. Based in Osaka, Japan, the Company recorded consolidated net sales of approximately 6,877 billion yen for the fiscal year ended March 31, 2002 (“fiscal 2002”). Over the past eight decades, the Company has grown from a small domestic household electrical equipment manufacturer into a comprehensive electronic and electric equipment, systems and components manufacturer operating internationally. Of the fiscal 2002 net sales, approximately one-half was represented by sales in Japan, with the rest by overseas sales. | ||
Primarily because of the business areas and geographical areas where it operates and the highly competitive nature of the industry to which it belongs, Matsushita is exposed to a variety of risks and uncertainties in carrying out its businesses, including, but not limited to, the following: |
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Weakness in the Japanese and global economies has significantly reduced demand for the products of Matsushita, which trend may continue in the future | ||
The Japanese economy has experienced a prolonged recession since the early 1990s, which has become increasingly serious. In addition, the global economy has taken a downturn, concurrently with setbacks in the global information technology industry. These recessionary conditions have resulted in sluggish consumer spending and weakened corporate capital expenditures in many industries. For example, the markets for mobile communications equipment and components and devices for the information technology industry, on which Matsushita is substantially dependent for its growth, have been particularly hard hit. Due to these conditions and restructuring expenses under the Value Creation 21 plan, Matsushita incurred a significant net loss for the year ended March 31, 2002. Matsushita currently does not foresee a rapid turnaround in the Japanese or global economy in the near term. These conditions may continue in the short- to mid-term, thereby further negatively affecting Matsushita’s businesses. | ||
Matsushita’s mid-term business plan may not produce the expected results | ||
Largely as a result of the recessionary conditions in the Japanese and global economies described above, Matsushita incurred substantial losses in fiscal 2002. Furthermore, the business environment in which Matsushita operates has evolved so dramatically in recent years that Matsushita’s traditional business model, namely having each product division and subsidiary operate autonomously in each product area, does not necessarily provide as many advantages as it once did. In response to these problems, starting in April 2001, Matsushita has been implementing its mid-term business plan called Value Creation 21. The plan consists of two key elements: structural reforms with an emphasis on the pursuit of higher management efficiency for customer satisfaction, and the pursuit of a new growth strategy. Matsushita, however, may not be successful in achieving all of the goals set out in the plan or in realizing the benefits that it expects from implementing the plan because of external and internal factors as further mentioned below. | ||
The restructuring of Matsushita’s businesses may not bring the improved efficiency, cost reduction and growth that Matsushita aims for | ||
Under the plan, Matsushita has been restructuring its traditional, decentralized product division set-up by establishing several centers that provide manufacturing services commonly used by different product divisions; restructuring its organizations for semiconductors and display devices; integrating some of its manufacturing units in Japan and overseas; reforming its consumer sales and distribution structure in Japan; and implementing employment restructuring initiatives. As an additional business restructuring measure, Matsushita is implementing share exchanges with five of its majority-owned subsidiaries to transform them into wholly-owned subsidiaries of Matsushita, effective on October 1, 2002, followed by a major Groupwide reorganization (see Section A of Item 4 – Information on the Company). By integrating their management, Matsushita seeks to create a corporate structure in which it will be able to conduct its consolidated Groupwide businesses speedily and efficiently, and to achieve synergies excepted from such restructuring. Matsushita may not, however, be able to improve efficiency and reduce costs and realize growth through these measures, due to unexpected additional reorganization expenses, improper allocation of operational resources or other unpredictable factors. |
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Matsushita may not succeed in executing its growth strategies outside of Japan | ||
The Value Creation 21 plan includes expanding Matsushita’s businesses in markets outside of Japan. In many of these markets, Matsushita may face risks such as political instability, economic uncertainty, cultural and religious differences and labor relations, as well as foreign exchange risks. Matsushita may also face barriers in commercial and business customs in foreign countries, including difficulties in timely collection of accounts receivable or in building and expanding relationships with potential customers, subcontractors or parts suppliers. Matsushita may also experience various political, legal on other restrictions, including restrictions on foreign investment or the repatriation of profits on invested capital, nationalization of local industry, changes in export or import restrictions or foreign exchange controls, and changes in the tax system or rate of taxation in countries where Matsushita operates business. With respect to the products exported overseas, tariffs, other barriers or shipping costs may make Matsushita’s products less competitive. Finally, expanding its overseas business may require significant investments long before Matsushita realizes returns on such investments, and increased investments may result in expenses growing at a faster rate than revenues. | ||
Matsushita is subject to intense competition in areas in which it operates, and this may adversely affect its ability to maintain its gross margins | ||
Matsushita produces a broad range of products and therefore faces many different types of competitors, from large international companies to relatively small, rapidly growing, and highly specialized organizations. Matsushita may choose not to fund or invest in one or more of its businesses to the same degree as its competitors in those businesses do, or it may not be able to do so in a timely manner or at all. These competitors may have greater financial, technical, and marketing resources available to them than Matsushita has in the respective businesses in which they compete. | ||
Rapid declines in product prices may adversely affect Matsushita’s financial results | ||
While some of the factors that drive competition vary by product area, price is a factor relevant in substantially all of Matsushita’s businesses. For the year ending March 31, 2003, Matsushita expects prices in many product areas in which it deals to decline significantly or more rapidly than in recent fiscal years. Matsushita believes that this trend will affect its businesses especially those of its AVC Networks category, which contributed approximately 59% of Matsushita’s net sales for the year ended March 31, 2002, and in the area of Matsushita’s Components and Devices category, which contributed approximately 20% of its net sales during the same period. | ||
Matsushita may not be able to keep pace with technological changes and develop new products and services in a timely manner to remain competitive | ||
Matsushita may fail to introduce new products and services in response to technological changes in a timely manner. Some of Matsushita’s core businesses, such as consumer digital electronics and key components and devices, are concentrated in industries where technological innovation is the central competitive factor. Matsushita continuously faces the challenge of developing and introducing viable and innovative new products. Matsushita must predict with reasonable accuracy both future demand and new technologies that will be available to meet such demand. If Matsushita fails to do so, it will not be able to compete in new markets and this could adversely affect Matsushita’s financial results and growth prospects. |
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Matsushita may not be able to develop product formats which would prevail asde factostandards | ||
Matsushita has been forming alliances and partnerships with other major manufacturers to strengthen the development of product formats, such as next-generation home and mobile networking products and software systems. Despite these efforts by Matsushita, its competitors may be the ones who develop thede factostandards for future products. | ||
The alliances with, and strategic investments in, third parties undertaken by Matsushita may not produce positive results | ||
Matsushita develops its business through forming alliances or joint ventures with, and making strategic investments in, other companies, including investments in venture companies. Matsushita’s key alliances are described in Item 4. Matsushita’s reliance on the strategy of partnering with third parties is increasing. They are crucial to Matsushita’s goal of introducing new products and services, including those using digital network technologies. Matsushita does not, however, control these partners, who may make decisions regarding their business undertakings with Matsushita which may be contrary to Matsushita’s interests. | ||
Matsushita may be subject to product liability claims that could result in significant direct or indirect costs | ||
There is a risk that defects may occur in Matsushita’s products and services. Many of Matsushita’s products and services are for so-called “mission-critical” uses — where the consequences of defects would be severe — exposing Matsushita in some cases to greater risks than those posed by ordinary retail products. The occurrence of defects could make Matsushita liable for damages caused by the defects, including consequential damages. Negative publicity concerning these problems could also make it harder for Matsushita to market its products and services. | ||
Currency exchange rate fluctuations could adversely affect Matsushita’s financial results | ||
Matsushita is exposed to risks of foreign currency exchange rate fluctuations. Matsushita’s consolidated financial statements, which are presented in Japanese yen, are affected by foreign exchange rate changes. These changes affect Matsushita’s international business transactions and costs and prices of Matsushita’s products and services in overseas countries in relation to the yen. They can also affect the yen value of Matsushita’s investments in overseas assets and liabilities. Although Matsushita is taking measures to reduce or hedge against foreign currency exchange risks, foreign exchange rate fluctuations may hurt its businesses, financial conditions or results of operations. Most typically, if the yen strengthens, Matsushita’s domestically manufactured products become less attractive to foreign purchasers in terms of price. |
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Matsushita may not be able to successfully recruit and retain skilled employees, particularly scientific and technical personnel | ||
Matsushita may fail to recruit skilled employees, particularly scientific and technical personnel, which are limited in number. Matsushita’s future success depends largely on its ability to attract and retain certain key personnel, including scientific, technical and management personnel. Matsushita anticipates that it will need to hire additional skilled personnel in all areas of its business. Industry demand for skilled employees, however, exceeds the number of personnel available and the competition for attracting and retaining these employees, especially scientific and technical employees, is intense. Because of this intense competition for these skilled employees, Matsushita may be unable to retain its existing personnel or attract additional qualified employees in the future. If Matsushita is unable to retain skilled employees and attract additional qualified employees to keep up with its future business needs, this may adversely affect its business and results of operations. | ||
Matsushita is dependent on the ability of third parties to deliver parts, components and services in adequate quality and quantity in a timely manner | ||
Matsushita’s manufacturing operations depend on obtaining deliveries of raw materials, components, equipment and other supplies in adequate quality and quantity in a timely manner. Since the products Matsushita purchases are often complex, it may be difficult for Matsushita to substitute one supplier for another or one component for another in a timely manner or at all. Some components are only available from a limited number of suppliers. Although Matsushita believes that it selects only reliable suppliers, shortages could occur in critical materials due to interruption of supply or increased industry demand and may adversely affect Matsushita’s operations. | ||
Matsushita may fail to protect its proprietary intellectual property or face a claim of intellectual property infringement by a third party, and may lose its intellectual property rights on key technologies or be liable for significant damages | ||
Matsushita’s success depends on its ability to obtain patents, licenses and other intellectual property rights covering its products and product design and manufacturing processes. The proceedings for obtaining intellectual property protection can be long and expensive. Patents may not be granted on currently pending or future applications or may not be of sufficient scope or strength to provide Matsushita with enough protection or commercial advantage. In addition, effective copyright and trade secret protection may be unavailable or limited in some countries, and Matsushita’s trade secrets may be vulnerable to disclosure or misappropriation by employees, contractors or others. Competitors or other third parties may also develop technologies that are protected by patents and other intellectual property rights, which make such technologies unavailable or available only on terms unfavorable to Matsushita. Litigation may also be necessary to enforce Matsushita’s intellectual property rights or to defend against intellectual property infringement claims brought against Matsushita by third parties. | ||
Matsushita is exposed to the risk that its customers, including those to whom it has provided vendor financing, may encounter financial difficulties | ||
Matsushita may incur losses if some of its customers encounter financial difficulties. Matsushita provides vendor financing to its customers. As more businesses utilize vendor financing, Matsushita may also provide increased vendor financing in the future. In addition, many of Matsushita’s customers purchase products and services from it on payment terms that do not provide for immediate payment. If customers to whom Matsushita has extended or guaranteed vendor financing, or from whom it has substantial accounts receivable, encounter financial difficulties and are unable to make payments on time, Matsushita’s business, financial condition and operating results could be adversely affected. |
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Governmental regulations may limit Matsushita’s activities or increase its operating costs | ||
Matsushita is subject to governmental regulations in Japan and other countries in which it conducts its business, including environmental laws and regulations, governmental approvals required for conducting business and investments, laws and regulations governing the radio telecommunications businesses and electric product safety, national security-related laws and regulations and export/import laws and regulations, as well as commercial, antitrust, patent, product liability, consumer and business taxation laws and regulations. To the extent that Matsushita cannot comply with these laws and regulations, Matsushita’s activities would be limited. In addition, these laws and regulations could increase Matsushita’s operating costs. | ||
Interest rate fluctuations could adversely affect Matsushita’s financial results | ||
Matsushita is exposed to the risk of interest rate fluctuations, which, despite the measures taken by Matsushita to hedge a portion of its exposure to interest rate fluctuations, may affect its overall operational costs and the value of its financial assets and liabilities. | ||
The decrease in the value of Japanese stocks may adversely affect Matsushita’s financial results | ||
Matsushita holds Japanese stocks as part of its investment securities. The value of most of these stocks, however, dropped substantially over the past year due to the decline of the Japanese economy. For example, Matsushita recorded a loss of 93 billion yen in its results of operations for the year ended March 31, 2002 related to other than temporary declines in its investment securities. |
Item 4. Information on the Company
A. | History and Development of the Company |
GENERAL
The Company was incorporated in Japan on December 15, 1935 under the laws of Japan as Matsushita Denki Sangyo Kabushiki Kaisha (Address : 1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan. Phone : +81-6-6908-1121 / Agent : Mr. Shigeru Nakatani, President of Panasonic Finance (America), Inc.) as the successor to an unincorporated enterprise founded in 1918 by the late Konosuke Matsushita. Mr. Matsushita led the Company with his corporate philosophy of contributing to the peace, happiness and prosperity of mankind through the supply of quality consumer electrical and electronic goods. The Company’s business expanded rapidly with the recovery and growth of the Japanese economy after World War II, as it met rising demand for consumer electric and electronic products, starting with washing machines, black-and-white television sets (TVs) and refrigerators. During the 1950s, Matsushita expanded its operations by establishing mass production and mass sales structures to meet increasing domestic demand, while also creating subsidiaries, making acquisitions and forming alliances. During the 1960s, Matsushita expanded its overseas businesses, and its products started getting world-wide recognition. |
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During the global recession caused by the first oil crisis in 1973, Matsushita strengthened its structure and overseas business relations. The advent and popularity of the video cassette recorder (VCR) from the late 1970s enabled Matsushita to receive worldwide recognition as a global consumer electronics manufacturer. In the 1980s, Matsushita further worked to evolve from a consumer products manufacturer to a comprehensive electronics products manufacturer, expanding its business in the areas of information and communications technology and industrial equipment and components. Since the 1990s, Matsushita has been emphasizing technological development and the use of advanced technology in every phase of life. In particular, Matsushita has been expanding its development activities in such areas as next-generation audiovisual (AV) equipment, multimedia products, and advanced electronic components and devices, many of which incorporate digital technology. | ||
Matsushita currently offers a comprehensive range of products, systems and components for consumer, business and industrial use. Most of the Company’s products are marketed under the “Panasonic” or “National” brand names. The Company also uses the “Technics” brand name for certain hi-fi products, with some of its subsidiaries using other brand names such as “Quasar,” “Victor” and “JVC.” To form the basis for growth in the evolving digital networking age, the Company continues to emphasize technological development and the creation of new businesses, identifying several priority areas, such as digital network systems, mobile communications, data storage devices, environmental systems and key components and devices. The Company is also striving to develop new service-oriented businesses, such as systems solutions and “e-Net” business, as areas of potential growth over the mid-term. | ||
In June 1995, Matsushita sold an 80% equity interest in MCA (now named Universal Studios, Inc.), which the Company purchased in December 1990, to The Seagram Company Ltd. for approximately U.S.$5.7 billion, leaving the Company with a minority interest. | ||
In April 1997, the Matsushita parent company established four internal divisional companies – responsible for AVC (audiovisual and computer products), home appliances and household equipment, air conditioners, and electric motors – by grouping a majority of its some 50 product divisions, in order to facilitate strategic planning, effective decision making and more efficient allocation of resources across a broader range than that afforded by each single product division. | ||
In March 1998, the Company announced a package of new management initiatives aimed at better sharing interests with shareholders. As part of this package, management implemented, with approval at the annual shareholders’ meeting in June 1998, the repurchase of 50 million shares of the Company’s common stock, spending approximately 99 billion yen during fiscal 1999. At the same time, as an incentive to Board members and employees toward the enhancement of corporate value, the Company introduced stock option plans for Board members and select senior executives, and established a stock-price-linked remuneration plan, under which modest cash payments have been offered to employees manager-level or above in addition to ordinary salary and bonus payments. | ||
In October 1999, EPCOS AG, a German electronic components joint venture of the Company and Siemens AG of Germany, had its initial public offering, listing its shares on German and U.S. stock exchanges. Following EPCOS AG’s public offering, Matsushita’s 45% (held by a subsidiary) and Siemens AG’s 55% holdings in EPCOS AG were reduced to nearly 12.5%, respectively. Matsushita realized a 59 billion yen gain from the sale of its shares in EPCOS AG in fiscal 2000. |
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In April 2000, the Company made its majority-owned subsidiaries, Matsushita Refrigeration Company and Wakayama Precision Company, into wholly-owned subsidiaries, by means of share exchanges. As a result of the share exchanges, the Company issued 16,321,187 shares of its Common Stock to shareholders of the respective companies. | ||
In June 2000, Kunio Nakamura, new President of the Company, established the Company’s new three-year business plan, called Value Creation 21, which was formally implemented in April 2001. The Value Creation 21 plan was designed to take full advantage of the opportunities arising in the evolving digital networking society. Its objective is to transform Matsushita into a company that meets the needs of the 21st century through structural reforms and growth strategies with emphasis on enhancing growth potential, profitability and capital efficiency, thereby ensuring the Company’s continued contribution to society. | ||
During fiscal 2002, the Company implemented a series of structural reforms under the Value Creation 21 plan, such as the restructuring of its domestic consumer sales and distribution structure, management initiatives through the use of information technology, such as supply chain management (SCM), the selective integration of businesses and manufacturing locations, manufacturing reforms, such as the introduction of the cell-style production, the reform of the Company-wide R&D structure to concentrate on development in strategic product or core technology areas, and employment restructuring initiatives including the regional-based employee renumeration system and special early retirement programs. | ||
In April 2001, the Company absorbed Matsushita Electronics Corporation (MEC), its wholly-owned subsidiary, by merger to implement unified operational management in such key device areas as semiconductors and display devices. By establishing new internal divisional companies directly under the control of the parent company, namely the Semiconductor, Display Device and Lighting companies, the development, manufacturing and sales functions that were previously disbursed between Matsushita and MEC for each of these strategic businesses have been integrated. | ||
As an additional structural reform aimed at achieving new growth under the Value Creation 21 plan, on January 10, 2002, Matsushita and five of its majority-owned subsidiaries (Matsushita Communication Industrial Co., Ltd., Kyushu Matsushita Electric Co., Ltd., Matsushita Seiko, Ltd., Matsushita Kotobuki Electronics Industries, Ltd. and Matsushita Graphic Communication Systems, Inc.) announced preliminary agreements to implement share exchanges to transform these subsidiaries into wholly-owned subsidiaries of Matsushita, effective October 1, 2002. The definitive agreements concluded between Matsushita and each of these subsidiaries have been approved by respective companies’ shareholders’ meetings on June 27, 2002. Following the completion of the share exchanges, Matsushita intends to implement, early in January 2003, the major reorganization of four of the five subsidiaries and Matsushita’s related internal divisional companies and sales divisions into seven new operating entities. These seven operating entities are tentatively named: Panasonic AVC Networks Company, Panasonic Communications & Imaging Co., Ltd., Panasonic Mobile Communications & Networks Co., Ltd., Panasonic Automotive Systems Company, Panasonic System Solutions Company, Matsushita Ecology Systems Co., Ltd. and Panasonic Factory Solutions Co., Ltd. Through this reorganization, Matsushita seeks to reestablish its business domains as strategic units, thereby achieving higher management efficiency and accelerated growth on a consolidated Groupwide basis. The reorganization will be implemented with focus on the elimination of duplication of business lines and of counterproductive competition within the consolidated Group, the unification and concentration of research and development resources, and the establishment of a totally integrated operational structure from development and manufacturing to sales in each domain for full customer satisfaction. |
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In April 2002, Matsushita and Toshiba Corporation established a joint venture company for the development, manufacture and sale of liquid crystal display (LCD) panels and next-generation display devices. Of the joint venture company’s initial capital of 10 billion yen, 60% was invested by Toshiba and 40% by Matsushita. The joint venture is expected to become one of the world’s leading LCD panel manufacturers, combining Matsushita’s fast-response LCD image processing technology, Toshiba’s technology of low-temperature polysilicon LCD panel manufacturing, and both companies’ experiences and technologies in the fields of consumer products, personal computers (PCs) and communication devices. The joint venture will start production of low-temperature polysilicon LCD panels in July 2002, to add to the existing LCD panel operations transferred from Matsushita and Toshiba. |
CAPITAL INVESTMENT
Recognizing that building advanced technologies, equipment and processes is essential to the cost-efficient and speedy manufacture of sophisticated electronic products and devices, Matsushita has been attentive in planning plant and equipment investment to achieve higher competitiveness and investment efficiency. Besides investment in production automation and energy-saving facilities, increasing emphasis has been placed on the expansion of facilities in such business areas as key components and devices, digital AV equipment and mobile communications equipment. | ||
Total capital investment (excluding intangibles) amounted to 338 billion yen, 504 billion yen and 309 billion yen for fiscal 2000, 2001 and 2002, respectively. The decrease for fiscal 2002 mainly reflects a severe business environment, as well as the fact that a series of major investment has peaked out in such key components and devices areas as semiconductors. | ||
For the current fiscal year ending March 31, 2003 (“fiscal 2003”), Matsushita expects its capital investment to decrease to approximately 240 billion yen as the Company places emphasis on higher asset efficiency, better utilizing existing facilities. Of the projected total amount, nearly 160 billion yen will be invested in facilities in Japan and the remaining 80 billion yen overseas. This investment will be funded primarily through internal sources. |
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B. Business Overview
SALES CATEGORIESBY PRODUCT CATEGORY
Matsushita is engaged in the production and sales of electronic and electric products in a broad array of business areas. The following table sets forth the Company’s sales breakdown by product categories for the last three fiscal years:
Matsushita is engaged in the production and sale of electronic and electric products in a broad array of business areas. The following table sets forth the Company’s sales breakdown by product category for the last three fiscal years; |
Yen (billions) | ||||||||||||||||||||||||||
Fiscal year ended March 31, | ||||||||||||||||||||||||||
2000 | 1999 | 1998 | ||||||||||||||||||||||||
Consumer products | ||||||||||||||||||||||||||
Video and audio equipment | 1,706 | 23 | % | 1,895 | 25 | % | 1,885 | 24 | % | |||||||||||||||||
Home appliances and | ||||||||||||||||||||||||||
household equipment | 1,306 | 18 | 1,394 | 18 | 1,474 | 18 | ||||||||||||||||||||
Subtotal | 3,012 | 41 | 3,289 | 43 | 3,359 | 42 | ||||||||||||||||||||
Industrial products | ||||||||||||||||||||||||||
Information and | ||||||||||||||||||||||||||
communications equipment | 2,022 | 28 | 2,150 | 28 | 2,264 | 29 | ||||||||||||||||||||
Industrial equipment | 735 | 10 | 717 | 10 | 701 | 9 | ||||||||||||||||||||
Subtotal | 2,757 | 38 | 2,867 | 38 | 2,965 | 38 | ||||||||||||||||||||
Components | 1,530 | 21 | 1,484 | 19 | 1,567 | 20 | ||||||||||||||||||||
Total | 7,299 | 100 | % | 7,640 | 100 | % | 7,891 | 100 | % | |||||||||||||||||
Yen (billions) (%) | ||||||||||||||||||||||||||
Fiscal year ended March 31, | ||||||||||||||||||||||||||
2002 | 2001 | 2000 | ||||||||||||||||||||||||
AVC Networks | ||||||||||||||||||||||||||
Video and audio equipment | 1,797 | 26 | % | 1,756 | 23 | % | 1,706 | 23 | % | |||||||||||||||||
Information and communications equipment | 2,255 | 33 | 2,524 | 33 | 2,375 | 33 | ||||||||||||||||||||
Subtotal | 4,052 | 59 | 4,280 | 56 | 4,081 | 56 | ||||||||||||||||||||
Home Appliances | 1,178 | 17 | 1,316 | 17 | 1,306 | 18 | ||||||||||||||||||||
Industrial Equipment | 289 | 4 | 468 | 6 | 382 | 5 | ||||||||||||||||||||
Components and Devices | 1,358 | 20 | 1,618 | 21 | 1,530 | 21 | ||||||||||||||||||||
Total | 6,877 | 100 | % | 7,682 | 100 | % | 7,299 | 100 | % | |||||||||||||||||
Consumer Products
Consumer products is Matsushita’s traditional business area and the Company maintains a high competitive edge in Japan and overseas markets. Sales in this category, consisting of video and audio equipment and home appliances and household equipment, totaled 3,012 billion yen and represented 41% of total Company sales in fiscal 2000. Details of major products are as follows:
Note: | Effective fiscal 2002, the Company reclassified its former Consumer, Industrial and Components categories into four new categories: AVC Networks, Home Appliances, Industrial Equipment, and Components and Devices. Prior years figures have been restated to reflect this change. |
AVC Networks | ||
The creation of AVC Networks as a new category is Matsushita’s response to the new business environment created by the evolution of digital networks such as the integration of broadcasting and communications and of those with the Internet. Matsushita is seeking new growth, in particular, by enhancing the levels of networkable digital products and interlinking them to develop and promote convenient home networking environments that Matsushita expects will be centered around digital TVs. | ||
Video and Audio Equipment
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Principal products in this sector include TVs, VCRs, camcorders, DVD players and recorders, |
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For TVs, Matsushita
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To prepare for the launch in Japan of digital TV-based e-Net services in 2002, Matsushita, in cooperation with Toshiba, Hitachi and other Japanese companies, including broadcasting networks and content providers, established eP Corporation to develop a common platform as the | ||
In the VCR and video camera area, Matsushita has been accelerating digitization, introducing digital VHS VCR decks and expanding its range of digital camcorders and digital still cameras, some of which incorporate the secure digital memory card mentioned below for memory storage and enhanced networking convenience. Of these, new models of digital still cameras, which benefit from the world-renowned optical technology of Leica Camera AG, achieved an immediate market success upon its introduction in the second half of fiscal 2002. | ||
As for DVDs, Matsushita offers a wide range of products from standard DVD players to
“Nintendo GameCube.” | ||
In the area of audio equipment, Matsushita produces a Matsushita expanded its range of new audio equipment in recent years, with the launch of DVD-Audio players, and a series of products using the secure digital memory card, such as an ultra-compact portable headphone player. The |
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Information and Communications Equipment | ||
Information equipment includes products such as personal computers (PCs), PC displays, HDDs, CD-ROM drives, DVD-ROM and DVD-RAM drives, DVD-ROM and CD-R/RW combination drives, and other optical disk drives, copying machines and printers. CD-ROM and DVD-ROM drives are devices which permit users to read only the data contained on CDs or DVDs, while CD-R/RW and DVD-RAM drives permit users to read and write data onto them. Communications equipment includes products such as telephones, cellular phones, other mobile communications equipment, digital private branch exchanges and facsimile equipment. Products in | ||
Matsushita is a worldwide leader in such business lines as optical disk drives, facsimile equipment, broadcast-use digital VCR equipment and airline in-flight AV systems. It also maintains a leading position in the Japanese cellular phone industry. For the last three fiscal years, however, this category’s business has shown some volatility due to such factors as increased price competition in the area of PC peripherals and the recent setback in global demand for information technology-related products such as PCs and cellular phones. | ||
With respect to PCs, Matsushita continued to upgrade its notebook models over the last several fiscal years. Matsushita launched an A5-sized notebook PC which can interface with charge coupled device cameras and cellular phones and, mainly for overseas markets, ruggedized notebook PCs built to resist shock, and thereby supporting such uses as police field activities in North America. This was followed in the year ended March 31, 2000 by the introduction of ultra slim models with added features such as wireless communication. In the year ended March 31, 2001, adding to its slim notebook series, Matsushita introduced an AV-oriented notebook PC that links easily to digital AV equipment to better meet the needs of the digital networking age. In the year ended March 31, 2002, Matsushita introduced what is currently | ||
In the | ||
In the area of communications equipment, Matsushita has developed and introduced a number of new mobile communications products with focus on downsizing, ease-of-use and Internet connectivity, in recent years. In the year ended March 31, 2000, Matsushita launched NTT DoCoMo’s popular i-mode cellular handsets equipped with e-mail and Internet browsing capabilities. |
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Furthermore, in the year ended March 31, 2001, Matsushita began shipments of base transceiver stations for next-generation, wideband code division multiple access (W-CDMA) cellular phone services that NTT DoCoMo, Inc. commenced in the year ended March 31, 2002, followed by shipments of W-CDMA handsets, which permit the transmission of moving images and large volumes of data. W-CDMA is the world’s first third-generation wireless voice, image and data transmission services using an | ||
In the area of facsimile equipment, Matsushita marketed in April 2000 a new multifunctional model, featuring facsimile, copier, printer, scanner and telephone functions, and in February 2002 a color facsimile machine, compatible with the secure digital memory card, to meet the ever-sophisticated customer needs. | ||
In the area of car AV equipment, Matsushita has continued to develop advanced car navigation systems for the domestic market, as well as further promoting global expansion in car audio equipment. Building on its success of the world’s first car navigation system incorporating DVD, Matsushita extended its car navigation networking capabilities by launching NTT DoCoMo’s i-mode capable models in the
| ||
In the area of broadcast-use AV equipment and
|
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Home Appliances | ||
Matsushita’s principal products
units. | ||
Matsushita
| ||
In addition to developing and introducing high-value-added products designed to stimulate the saturated appliance market in Japan, Matsushita has also been strengthening its business base by taking the lead in the newer, growth product
| ||
Furthermore, Matsushita is
| ||
In May 2001, Matsushita entered into an agreement on a broad business alliance with Hitachi Ltd. in
|
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government agencies in Japan and overseas. environmentally-conscious products.Industrial Equipment Matsushita’s product range of industrial equipment encompasses factory automation (FA) equipment, welding machines, electric power distribution equipment, commercialventilating and air conditioning equipment, vending machines and medical equipment. This category also includes car AV equipment, such as car audioIn addition, Matsushita is reinforcing its engineering services business, mainly for private enterprises and car navigation equipment.In the area of FA equipment, Matsushita is an industry leader in electronic-parts-mountingelectronic-parts mounting machines, and major producer ofalso produces industrial robots and electronic measuring instruments. The Company reinforced its lineupBuilding on this strength to meet increasingly sophisticated customer requirements, Matsushita has launched innovative products in fiscal 2000 by concentratingrecent years, with a focus on smaller, lighter high-precision machinesmachines. Examples include a “Stud Bump Bonding” semiconductor mounting machine and introduced a new high-speed multifunctional chip mounter, as well as an innovativea laser processing machine to satisfy demand for ultrafine,ultra-fine production of high-integration circuit boards. The CompanyMatsushita has also added modular components mounters to solidify its mainstay range of parts-mounting machines in the year ended March 31, 2002. Concurrently, Matsushita introduced the world’s smallest and lightest fully digital carbon dioxide/metal active gas automatic welding machine. Matsushita also holds a competitive position in the market for DVD disc mastering and replication equipment. Matsushita is currently augmenting its efforts to become a total FA solutions provider offering not only equipment utilizingbut also comprehensive engineering services and related support.In the area of commercial-use ventilating and air-conditioning systems, Matsushita has been expanding delivery of its advanced authoringspecialty in-tunnel dust collection and disc bonding technologies.Car AV equipment suchventilation systems to Japan’s major expressways. Matsushita sources the manufacture of packaged air conditioners to Daikin Industries, Ltd. as part of an alliance entered into in November 1999 between the car navigation system are taking on an increasingly expanding role. To meet market needs,two companies. The alliance covers a broad range, also including consumer-use air conditioners in which Matsushita continueswill provide manufacturing cooperation to introduce more advanced car navigation systems, such as DVD-equipped models that feature networking capabilities including E-mail and Internet browsingDaikin, as well as interact with various new services such as mapjoint procurement of parts and traffic informationmaterials and Electronic Toll Collection systems. All the above are an integral partco-development of the development of the Intelligent Transport Systems (ITS) currently under way in Japan.Components Matsushita produces a wide range of electronic and electric components and devices. DevicesMajor products included in this category are semiconductors, general electronic components, display devices, electric motors, compressors and batteries, to support the Company’ssome of which are incorporated into Matsushita’s finished products and some of which are for sale to other manufacturers. Sales of components as a whole in fiscal 2000, excluding in-house consumption, totaled 1,530 billion yen, accounting for 21% of the Company’s overall sales.Recognizing that components and devices hold the key to innovation and advancement, as well as the competitiveness of finished products and systems in the digital networking age, Matsushita places significant priority on the development of electronic components’competitive components and devices technology and business. During and since the year ended March 31, 2001, business with special emphasisin this category has been adversely affected by setbacks in the demand from the cellular phone and other information technology-related industries. Given this adverse business environment, Matsushita implemented various structural reforms, including the centralization of manufacturing locations and the establishment of a new liquid crystal display (LCD) joint venture. In addition, to secure growth and profitability in this business category, Matsushita concentrates on semiconductorsthe development of proprietary “black-box” technologies and display devices.- 9the business expansion centered on the 120 strategic products that have the potential to achieve top global positions in their respective markets.
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The Company’s range of
Matsushita’s semiconductors
| ||
Matsushita manufactures general components, encompassing electronic circuit components, printed circuit boards, transformers, power supply components, coils, capacitors, resistors, tuners, speakers, ceramic components, and various sensors. protocol. | ||
In the area of display devices, Matsushita has recently added high-technology semi-stretched tension flat-surface CRTs and has further expanded model in 2001. Matsushita strengthened its manufacturing structure through a number of initiatives, including the commencement of production at a new PDP plant in China in December 2001. | ||
In the area of electric motors, Matsushita recently augmented its FA equipment motor lineup with |
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Matsushita is one of the world’s largest battery manufacturers, producing |
MARKETING CHANNELS
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SALES AND DISTRIBUTION
Set forth
The table below
|
Yen (billions) (%) | |||||||||||||||||||||||||
Fiscal year ended March 31, | |||||||||||||||||||||||||
2002 | 2001 | 2000 | |||||||||||||||||||||||
Japan | 3,348 | 49 | % | 4,034 | 53 | % | 3,698 | 51 | % | ||||||||||||||||
North and South America | 1,359 | 20 | 1,380 | 18 | 1,384 | 19 | |||||||||||||||||||
Europe | 775 | 11 | 849 | 11 | 906 | 12 | |||||||||||||||||||
Asia and Others | 1,395 | 20 | 1,419 | 18 | 1,311 | 18 | |||||||||||||||||||
Total | 6,877 | 100 | % | 7,682 | 100 | % | 7,299 | 100 | % | ||||||||||||||||
Sales and Distribution in Japan | ||
Domestic sales are handled | ||
For the consumer market, Matsushita maintains the industry’s most extensive sales networks, supplying | ||
Matsushita sells its products to non-consumers, such as manufacturers, business corporations, construction companies and governments, through its sales subsidiaries or through outside agencies. Sales to corporate and government customers are centered on information and communications equipment, and sales to the manufacturing industry are focused on industrial equipment and components. |
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With the exception
In April 2001, Matsushita began implementing major reorganizations of realizes a significant reduction in distribution costs and an increased market share. | ||
Overseas Activities | ||
Matsushita operates | ||
Overseas sales
2002. | ||
In order to promote global business development and counter currency fluctuations,
| ||
Matsushita places emphasis |
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Customers | ||
The largest markets for |
SEASONALITY OF BUSINESS
RESEARCH AND DEVELOPMENT
Matsushita considers research and development to be a key factor
The Company’s main business has no significant seasonality in
| ||
Additionally, seasonal appliances, such as
|
RAW MATERIALS AND SOURCE OF SUPPLY
CAPITAL EXPENDITURES
Recognizing that building advanced technologies, equipment and processes is essential to the cost-efficient manufacturing of sophisticated electronic products and devices, the Company has been attentive in planning plant and equipment investment to achieve higher competitiveness and investment efficiency. Besides constant investment in production automation and energy-saving facilities, increasing emphasis has been placed on expansion of such business areas ranging from digital AV equipment and mobile communications equipment to components and devices.
Total capital expenditures were 474 billion yen, 352 billion yen and 338 billion yen for fiscal 1998, fiscal 1999 and fiscal 2000, respectively.
Capital expenditures have declined over the past three years as the Company concentrates and focuses its resources on such strategically important areas as key components and devices including semiconductors and LCD devices, while implementing selective investment in other operating areas.
COMPETITION
The markets in which the Company sells its products are highly competitive in Japan, as well as abroad. Matsushita’s principal competitors, across the full range of its products, consist of several large Japanese manufacturers and a large number of smaller and more specialized companies. In particular categories of products it encounters additional competition from companies in the United States, Europe and Asia. The Company expects that competition will continue to be intense both in Japan and abroad.
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In addition, the recent advancement towards a borderless economy, has applied pressure to Japanese manufacturers, including Matsushita, in terms of price competition globally. To minimize the effects of these negative factors, the Company is devising various cost-reduction and efficiency measures to enhance competitiveness from a global perspective, such as increasing overseas production and shortening production and logistics lead time through the introduction of SCM, and also developing joint ventures and other cooperative agreements with overseas partners.
TRADEMARKS
Most of Matsushita’s products are distributed throughout the world under the “Panasonic” and “National” trademarks. Matsushita also sells a number of hi-fi products under the “Technics” trademark. Some of the subsidiaries’ products are sold under other trademarks, including “Quasar,” “Victor” and “JVC.”
PATENT LICENSE AGREEMENTS
Matsushita holds numerous Japanese and foreign patents and utility model registrations for its products and engages in mutual exchange of technologies with a number of Japanese and foreign manufacturers. Its technical assistance, or licensing, to other manufacturers is increasing year by year.
Matsushita is a licensee under various license agreements which cover a wide range of products, including audiovisual products, computers, communications equipment, semiconductors and other components. Matsushita has non-exclusive patent license agreements, among others, with Thomson Multimedia Licensing Inc. and Thomson S.A. covering a broad range of its products, including TVs, VCRs, CD players and CD-ROM drives. Matsushita has non-exclusive patent cross-license agreements, among others, with Texas Instruments Incorporated and International Business Machines Corporation, both covering semiconductors, information equipment and certain other related products. Matsushita Electronics Corporation (MEC), a consolidated subsidiary of the Company, has non-exclusive patent license agreements with Koninklijke Philips Electronics N.V. covering most of the items manufactured by MEC, including semiconductor devices, various lamps, cathode-ray and electron tubes and certain other products.
Most of Matsushita’s license and technical assistance agreements are for three- to ten-year periods, unless the agreements cover specific patents to be licensed therein, in which case they are normally for the life of the patent.
The Company considers all its technical exchange and license agreements beneficial to its operations.
RAW MATERIALS AND SOURCES OF SUPPLY
Matsushita purchases a wide variety of parts and materials from various suppliers in Japan and abroad. The Company applies a multi-sourcing policy — being not dependent upon any one source of supply for any essential item. The Company has also been endeavoring to promote a policy of global optimum purchasing by selecting the | ||
In an attempt to improve |
PATENT LICENSE AGREEMENTS
Matsushita holds numerous Japanese and foreign patents and utility model registrations for its products and shares technologies with a number of Japanese and foreign manufacturers. Its technical assistance, or licensing, to other manufacturers has been increasing year by year. |
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Matsushita is a licensee under various license agreements which cover a wide range of products, including AV products, computers, communications equipment, semiconductors and other components. Matsushita has non-exclusive patent license agreements, with among others, Thomson Multimedia Licensing Inc. and Thomson Licensing S.A. covering a broad range of its products, including TVs, VCRs, CD players and CD-ROM drives. Matsushita has non-exclusive patent cross-license agreements, with among others, Texas Instruments Incorporated and International Business Machines Corporation, both covering semiconductors, information equipment and certain other related products. Certain internal divisional companies as successors to Matsushita Electronics Corporation, a former subsidiary now merged into the Company, have non-exclusive patent license agreements with Koninklijke Philips Electronics N.V. covering most of the items manufactured by such divisional companies, including semiconductor devices, various lamps, cathode-ray and electron tubes and certain other products. | ||
Most of Matsushita’s license and technical assistance agreements are for three- to ten-year periods, unless the agreements cover specific patents to be licensed therein, in which case they are normally for the life of the patent. | ||
The Company considers all of its technical exchange and license agreements beneficial to its operations. |
COMPETITION
The markets in which the Company sells its products are highly competitive. Matsushita’s principal competitors, across the full range of its products, consist of several large Japanese and international manufacturers and a number of smaller and more specialized companies. In certain categories of products it encounters additional competition from companies in the United States, Europe and Asia. The Company expects that competition will continue to be intense both in Japan and abroad. | ||
In addition, the recent advancement towards a borderless economy has applied pressure to Japanese manufacturers, including Matsushita, in terms of global price competition. To minimize the effects of these negative factors, the Company is |
GOVERNMENT REGULATIONS
Effective April 1, 2001, the Japanese government enacted the Law for Recycling of Specified Kinds of Consumer Electric Goods (the Recycling Law). The Recycling Law requires that consumers, retailers and manufacturers share the responsibility of recycling used TVs, refrigerators, air conditioners and washing machines. |
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To cope with requirements under the Recycling Law, Matsushita set up an
recycling activities. The Company
Recycling Law. | ||
The Company is | ||
C. | Organizational Structure | |
In order to
| ||
Principal divisional companies and subsidiaries as of March 31, |
(1) | Internal divisional companies of | ||
Name of internal divisional company | |||
AVC Company | |||
Home Appliance & Housing Electronics Company | |||
Air-Conditioner Company | |||
Packaged Air-Conditioner Company | |||
Motor Company | |||
Semiconductor Company | |||
Display Devices Company | |||
Lighting Company | |||
Factory Automation Company |
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(2) | Principal domestic subsidiaries: |
Name of company | Percentage owned | |||
Matsushita Communication Industrial Co., Ltd.* | 56.3 | % | ||
Matsushita Electronic Components Co., Ltd. | 99.3 | |||
Matsushita Industrial Equipment Co., Ltd. | 100.0 | |||
Matsushita Battery Industrial Co., Ltd. | 98.0 | |||
Matsushita Refrigeration Company | 100.0 | |||
Kyushu Matsushita Electric Co., Ltd.* | 51.5 | |||
Matsushita Seiko Co., Ltd.* | 57.6 | |||
Matsushita Graphic Communication Systems, Inc. * | 67.8 | |||
Matsushita Kotobuki Electronics Industries, Ltd. * | 57.6 | |||
Victor Company of Japan, Ltd. | 52.4 |
(* The asterisked companies are scheduled to become wholly-owned subsidiaries of Matsushita Electric Industrial Co., Ltd. via share exchanges, effective October 1, 2002.) |
(3) | Principal overseas subsidiaries: |
Country of | ||||||||
Name of company | incorporation | Percentage owned | ||||||
Matsushita Electric Corporation of America | U.S.A. | 100.0 | % | |||||
Matsushita Electric Europe (Headquarters) Ltd. | U.K. | 100.0 | ||||||
Matsushita Electric Asia Pte. Ltd. | Singapore | 100.0 | ||||||
Matsushita Electric Espana S.A. | Spain | 100.0 | ||||||
Matsushita Electric (Taiwan) Co., Ltd. | Taiwan | 68.2 | ||||||
Matsushita Industrial Corporation Sdn. Bhd | Malaysia | 99.3 | ||||||
Matsushita Television & Network Systems Co., (Malaysia) Sdn. Bhd | Malaysia | 100.0 | ||||||
Matsushita Refrigeration Industries (S) Pte. Ltd. | Singapore | 100.0 | ||||||
Matsushita Electronics (S) Pte. Ltd. | Singapore | 100.0 |
Note: | Matsushita’s consolidated financial statements as of March 31, 2002 comprise the
|
D. | Property, Plants and
Equipment | |
The Company’s principal executive offices and key research laboratories are located in Kadoma, Osaka, Japan. | ||
Matsushita’s manufacturing plants are located principally in Japan, other countries |
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The following table sets forth information as of March 31, |
Floor Space | |||||||
(thousands of | |||||||
Location | square feet) | Principal Products Manufactured | |||||
Osaka | 9,228 | VCRs, PDP TVs, DVD products, audio equipment, washing machines, other home appliances, information equipment, industrial equipment, components, batteries, kitchen fixtures. | |||||
Kanagawa | 4,264 | Communications, information and measuring equipment, VCRs, audio equipment, car AV equipment, compact discs, refrigerators, batteries. | |||||
Shiga | 3,564 | Air conditioners, refrigerators, compressors, vacuum cleaners. | |||||
Tochigi | 1,869 | TVs, TV picture tubes, information equipment. | |||||
Nara | 1,992 | Home appliances, gas and kerosene equipment, compact discs and DVD discs. | |||||
Okayama | 1,905 | VCRs, components, magnetic tapes and discs. | |||||
Kyoto | 1,627 | Semiconductors, components. | |||||
Ibaraki | 1,118 | Magnetic tapes. | |||||
Shikoku | 3,694 | VCRs, information equipment, home appliances. | |||||
Kyushu | 3,216 | Information and communications equipment, components, industrial equipment. | |||||
North America | 7,715 | TVs, home appliances, VCRs, DVD discs, car audio equipment, communications equipment, components, batteries. | |||||
Europe | 4,184 | VCRs, TVs, audio equipment, car audio equipment, home appliances, components, information and communications equipment. | |||||
Asia (excluding China) | 17,673 | TVs, VCRs, audio equipment, air conditioners, refrigerators, other home appliances, components, semiconductors, information and communications equipment, industrial equipment, compressors, batteries. | |||||
China | 5,185 | TVs, audio equipment, air conditioners, washing machines, other home appliances, car audio equipment, communications equipment, industrial equipment, compressors, components, batteries. | |||||
Other | 17,009 | Home appliances, industrial equipment, components, semiconductors, video and audio equipment, batteries, information and communications equipment. | |||||
Total | 84,243 | ||||||
All of the above facilities and properties are fully owned by the Company, except for the land, some parts of which are leased from companies outside of the Matsushita Group. |
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In addition to its manufacturing facilities, Matsushita’s properties all over the world include sales offices located in various cities with an aggregate floor space of approximately 7.7 million square feet, research and development facilities with an aggregate floor space of approximately 6.9 million square feet, employee housing and welfare facilities with an aggregate floor space of approximately 11.411.3 million square feet, and administrative offices with an aggregate floor space of approximately 17.019.0 million square feet.
Item 5. Operating and Financial Review and Prospects
A. | Operating Results | |
Since the early to mid-1990s, the Japanese economy has been experiencing slow growth and stagnation. The continued general decline of Japanese real estate prices and a series of bank and corporate failures and the related instability in the Japanese financial system have increased economic uncertainty. In the year ended March 31, 2000, the Japanese economy began to recover moderately, owing to government economic stimulus packages and a surge in demand for information technology (IT)-related goods and services which resulted in a 1.9% increase in real gross domestic product. The recovery continued into the year ended March 31, 2001, especially in the first half, led by IT-related corporate capital investment. In the second half of that year, however, economic growth in Japan slowed once again due to sluggish consumer spending and weak growth in exports, along with a sharp slowdown in demand for IT and related products. On an annual basis, Japan’s gross domestic product grew 1.7% in real terms during the year ended March 31, 2001. For the year ended March 31, 2002, Japan’s real gross domestic product declined 1.3%, due mainly to the continuing recession in the global IT industry, sluggish capital spending and reduced exports. Slow consumer spending also contributed to the decline. |
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For the first part of the three years ended March 31, 2002, overseas economic conditions were generally favorable, particularly in the United States. From around the middle of the year ended March 31, 2001, however, economic growth in the United States began to slow down. This slowdown coincided with setbacks in the global IT industry, which had previously enjoyed rapid growth in demand centered on personal computers and cellular phones. These conditions are currently having negative effects on Asian and European economies, as well as the IT and related electronic equipment and components industries around the world. | ||
During the period, sluggish consumer spending and capital investment have triggered deflation in Japan. The consumer price index in Japan declined 0.5% in the year ended March 31, 2000 and declined 0.5% again in the year ended March 31, 2001. In the year ended March 31, 2002, the consumer price index continued to fall, recording a decline of 1.0%. This deflationary trend has been reflected in the declining prices of goods and services in Japan, which have been putting pressure on the earnings of Japanese businesses. | ||
Foreign currency exchange rates were volatile during the three-year period, with the Japanese yen generally weakening against such major currencies as the U.S. dollar and the Euro (see Section A of Item 3). In order to alleviate the effects of currency-related transaction risk, Matsushita has traditionally used several currency risk hedging methods, such as forward foreign-exchange contracts and currency options contracts with leading banks. Matsushita has also implemented matching of exports and imports exchange contracts. As a basic countermeasure against currency exchange risk, the Company has been strengthening production operations outside Japan to meet overseas demand, while reducing dependence on exports from Japan. The Company does not have any material unhedged monetary assets, liabilities, or commitments denominated in currencies other than the operation’s functional currency. | ||
In the face of the previously mentioned severe economic environment, Matsushita commenced, in April 2001, implementing its mid-term business plan, Value Creation 21, which covers the three-year period ending March 31, 2004. This plan is intended to respond to the changing business environment, especially society’s transition to a so-called ubiquitous networking society in the twenty-first century, to which Matsushita believes it must adapt in order to continue to satisfy customer needs and contribute to society. From the viewpoint of its financial results, Matsushita hopes, through the implementation of the plan, to achieve growth in sales and earnings by developing, manufacturing and selling products that respond to the needs of customers in the new era of the ubiquitous networking society, and by improving efficiency through restructuring programs which it hopes will also help to realize a sizable reduction in its fixed costs. | ||
Matsushita’s consolidated sales and earnings results during the last three fiscal years, reflecting all of the aforementioned external and internal conditions, can be summarized as follows: | ||
In fiscal 2000, net sales decreased 4.5% to 7,299 billion yen, mainly attributable to sluggish demand in Japan due to continued weak consumer spending, intense global price competition and yen appreciation. Net income totaled 100 billion yen increasing 311.2% over the previous year. Increased profitability in Components and Devices and improved overall efficiency could not fully offset the negative effects of price declines and yen appreciation on earnings. However, the significant net income increase was realized largely due to a non-operating gain of 59 billion yen from the sale of shares of EPCOS AG, a German electronic component manufacturing joint venture, as well as adjustments in net deferred tax assets in the previous fiscal year, which were not incurred in fiscal 2000. |
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In fiscal 2001, net sales rose 5.2% to 7,682 billion yen, due mainly to generally favorable economic conditions in Japan and overseas, as well as increased demand for IT-related products and components, especially in the first half of the fiscal year. Despite the positive effect of this sales gain and overall cost reduction and efficiency improvement efforts, net income declined 58.4% to 42 billion yen, largely because of restructuring expenses incurred to compensate employees in Japan subject to the new regional-based employee remuneration system and certain subsidiaries’ early retirement programs, both implemented as part of the mid-term Value Creation 21 plan. The absence of the previous year’s non-operating gain from the sale of EPCOS AG shares also adversely affected net income. | ||
In fiscal 2002, net sales declined 10.5% to 6,877 billion yen. Sales in the video and audio equipment sector of the AVC Networks category rose, compared with fiscal 2001, attributable to steady growth in digital AV equipment. Sales in almost all other sectors, however, dropped from the previous year. Specifically, the information and communications equipment sector and the Components and Devices category were negatively affected by a worldwide downturn in IT-related industries, while reduced capital investment globally caused a steep fall in sales in the Industrial Equipment category. In addition to these sales declines, the Company incurred various restructuring expenses under the Value Creation 21 plan as mentioned below. Reflecting these adverse factors, along with corporate tax effects and a decrease in minority interests due to negative earnings of certain subsidiaries, the Company incurred a net loss of 431 billion yen. | ||
Under the Value Creation 21 plan (see Section A of Item 4 for a description of the plan), Matsushita implemented in fiscal 2002 employment restructuring programs, including special early retirement programs for employees of the parent company and several subsidiaries in Japan, in order to meet employees’ ever-diversifying attitudes toward work. The number of employees who participated in the special early retirement programs totaled approximately 13,000 persons. Expenses related to these employment restructuring programs, including one-time payment packages to the early retirees, amounted to approximately 164 billion yen in fiscal 2002. | ||
Concurrently, the Company recognized an impairment loss during fiscal 2002 related to the write-down of the machinery and equipment to manufacture display devices and other components. Matsushita also carried out business restructuring initiatives, including the closure or integration of several manufacturing locations in Japan and overseas to maintain competitiveness and increase capital efficiency. Expenses related to the impairment loss and business restructuring totaled 86 billion yen in fiscal 2002. | ||
For expected cost savings in fiscal 2003 as a result of the above employment and business restructuring, see Section D of this Item 5 - Trend Information. | ||
Details of operating and financial results during the last three fiscal years are as follows: |
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Year ended March 31, 2002 compared with 2001
(1) | Sales | |
Consolidated net sales for fiscal 2002 were down 10.5% to 6,877 billion yen from 7,682 billion yen in the previous year. The decline was mainly a result of negative effects of the recession in the global IT industry and weak economic conditions in Japan and overseas. The recession in Japan deepened with sluggish consumer spending and retracted capital investment, while overseas, the slowdown in U.S. economic growth, combined with the September 11 terrorist attacks, led to a weakening of Asian and European economies. | ||
Domestic sales fell 17.0% to 3,348 billion yen. This decrease was mainly a result of slow sales of products in the AVC Networks category, particularly information and communications equipment. In components and devices, as well, setbacks in the information and communications-related industries resulted in depressed sales of general components, semiconductors and electric motors. Overseas sales were 3,528 billion yen, down 3.3% when translated into yen and down 10.5% on a local currency basis. Sharp sales declines of components and devices were a major factor in the overseas sales decline. | ||
(2) | Other Revenues (Revenue excluding Net Sales) | |
Other revenues include interest income, dividends received and other income. Of these, interest income decreased 23.2% to 34 billion yen, and dividends received also decreased 25.1% to 9 billion yen. Other income remained mostly flat, decreasing only 0.6% to 54 billion yen. | ||
(3) | Costs and Expenses | |
As net sales declined, cost of sales decreased 6.3% to 5,134 billion yen and selling, general and administrative expenses also decreased 2.9% to 1,954 billion yen. Meanwhile, interest expense decreased 5.3% to 41 billion yen, owing to a reduction in the Company’s borrowings. However, other deductions increased 153.9% to 391 billion yen, including 164 billion yen related to employment restructuring programs, such as additional retirement allowances for special early retirement programs, 86 billion yen related to business restructuring expenses, such as impairment losses, and other expenses associated with the closure or integration of several manufacturing locations, and a write-down of 93 billion yen on investment securities, compared with restructuring charges for fiscal 2001, which included one-time expenses of 100 billion yen associated with the implementation of the regional-based employee remuneration system and early retirement programs in several domestic subsidiaries. The aggregate restructuring accrual of 6,660 million yen at the end of fiscal 2002 mainly consists of rental cancellation penalty fees under contractual obligations and compensation fees for subcontractors in several subsidiaries. It is expected that the restructuring accrual balance will be paid during fiscal 2003. | ||
(4) | Income (Loss) before Income Taxes | |
As a result of the above factors, income before income taxes turned to a loss of 548 billion yen, compared with a pretax profit of 101 billion yen in fiscal 2001. |
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(5) | Provision for Income Taxes | |
Provision for income taxes generated a benefit of 57 billion yen, compared with an expense of 50 billion yen in the previous year. Its ratio to income (loss) before income taxes turned to 10.4%, from 49.5% a year ago. This is mainly due to an increase of valuation allowance for deferred tax assets. | ||
(6) | Minority Interests | |
Minority interests decreased to negative 60 billion yen for fiscal 2002, compared with 22 billion yen in fiscal 2001, reflecting depressed or negative earning results of several subsidiaries. | ||
(7) | Equity in Earnings of Associated Companies | |
Equity in earnings of associated companies decreased to 59 million yen, from the previous year’s 13 billion yen, due mainly to decreased earnings of associated companies. | ||
(8) | Net Income (Loss) | |
As a result of all the factors stated in the preceding paragraphs, the Company recorded a net loss of 431 billion yen for fiscal 2002, compared with a net income of 42 billion yen in the previous fiscal year. | ||
(9) | Results of Operations | |
Beginning in the year ended March 31, 2002, Matsushita discloses results of operations according to the reclassified product segments; AVC Networks, Home Appliances, Industrial Equipment, and Components and Devices. Accordingly, information for previous years has been restated to correspond to the new classifications. | ||
Results of operations by business segment were as follows: | ||
AVC Networks sales declined 5.3% to 4,052 billion yen, from 4,280 billion yen in the previous year. Within this category, despite sluggish sales of VCRs, overall sales of video and audio equipment grew 2.3% from the previous year to 1,797 billion yen, due mainly to increased overseas sales of TVs and rapid worldwide sales expansion of DVD equipment and discs. Sales of information and communications equipment declined 10.7% to 2,255 billion yen. Although strong sales were recorded for car AV equipment and broadcast- and business-use AV equipment, drastically reduced sales in mobile communications equipment, specifically cellular phones, and hard disk drives, resulted in an overall sales decrease within this category. | ||
With respect to this segment, Matsushita’s segment profit decreased from 104 billion yen for the year ended March 31, 2001 to a loss of 52 billion yen for the year ended March 31, 2002. The sharp decrease in profit was mainly due to lower sales in mobile communications equipment, including cellular phones, and the severe market price competition in video and audio equipment. | ||
Sales of Home Appliances decreased 10.4% to 1,179 billion yen. Although microwave ovens and vacuum cleaners recorded strong sales overseas, weak domestic demand for refrigerators and washing machines, partly due to unusually high sales at the end of the previous fiscal year prior to the enactment of a new recycling law in Japan, worked to lower overall sales in this category. |
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With respect to this segment, Matsushita’s segment profit fell 30.4% from 55 billion yen for the year ended March 31, 2001 to 38 billion yen for the year ended March 31, 2002. The cost reduction efforts could not offset the adverse effect of overall sales decrease. | ||
Sales of Industrial Equipment were 296 billion yen, down 37.7% from the previous year. As orders from IT-related industries remained slow, domestic and overseas sales of factory automation (FA) equipment were negatively impacted, leading to a sharp sales decrease in this category. | ||
Due to the significant declines of sales, Matsushita’s segment profit for Industrial Equipment decreased from 18 billion yen for the year ended March 31, 2001 to a loss of 44 billion yen for the year ended March 31, 2002. | ||
Sales of Components and Devices decreased 20.4% to 1,973 billion yen. This was mainly due to sharp declines in sales of general components, semiconductors, liquid crystal display (LCD) devices and batteries all mainly for cellular phone- and IT-related industries. | ||
With respect to this segment, Matsushita’s segment profit decreased from 89 billion yen for the year ended March 31, 2001 to a loss of 96 billion yen for the year ended March 31, 2002, principally owing to significantly reduced sales and further price reductions to meet customer demands. |
Year ended March 31, 2001 compared with 2000
(1) | Sales | |
Consolidated net sales for fiscal 2001 increased 5.2% to 7,682 billion yen, from 7,299 billion yen in the previous year. The growth mainly reflected a moderate recovery in the Japanese economy and a favorable advance in overseas economies, along with the expansion of worldwide, IT-related investment, although toward the end of the year external conditions led to a sharp adverse turn with a slowdown in growth of the U.S. economy and rapidly weakening global demand for IT-related products and components. | ||
Domestic sales climbed 9.1% to 4,034 billion yen. This increase was achieved through solid growth in Industrial Equipment, including FA equipment, as well as Components and Devices, such as general electronic components and semiconductors. A moderate recovery in AVC Networks, achieved mainly by growth in digital AV equipment also contributed to the increase in domestic sales. Overseas sales were 3,648 billion yen, up 1.3% when translated into yen and up 5.0% on a local currency basis, with the Components and Devices category leading the way. | ||
(2) | Other Revenues (Revenue excluding Net Sales) | |
Other revenues include interest income, dividends received and other income. Of these, interest income increased 1.8% to 44 billion yen, while dividends received decreased 16.6% to 12 billion yen. Other income decreased 60.2% to 54 billion yen, as there was no significant gain recorded in this fiscal year comparable to the previous year’s gain of 59 billion yen from the sale of EPCOS AG shares. |
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(3) | Costs and Expenses | |
As net sales expanded, cost of sales increased 5.6% to 5,481 billion yen and selling, general and administrative expenses also increased 3.2% to 2,012 billion yen. However, the ratio of these operating expenses in aggregate to net sales declined by 0.3%, compared with the previous year, offsetting the adverse effects of price declines and yen appreciation. Meanwhile, interest expense also decreased 5.8% to 44 billion yen, owing to a reduction in the Company’s borrowings. However, other deductions increased 76.0% to 154 billion yen, due mainly to the aforementioned restructuring expenses, totaling approximately 100 billion yen, associated with compensation for domestic employees affected by the new regional-based employee remuneration system, as well as early retirement programs in several domestic subsidiaries. As a result, total costs and expenses increased 5.7% to 7,691 billion yen. | ||
(4) | Income before Income Taxes | |
As a result of the above factors, income before income taxes decreased 53.9% to 101 billion yen, compared with 219 billion yen in fiscal 2000. | ||
(5) | Provision for Income Taxes | |
Provision for income taxes amounted to 50 billion yen, compared with 137 billion yen in the previous year. Its ratio to income before income taxes dropped to 49.5%, from 62.7% a year ago, due mainly to a lower increase in the valuation allowance for deferred tax assets. | ||
(6) | Minority Interests | |
Minority interests increased to 22 billion yen, compared with negative 1 billion yen in fiscal 2000, reflecting the earnings improvements and turnaround from losses of certain subsidiaries. | ||
(7) | Equity in Earnings of Associated Companies | |
Equity in earnings of associated companies decreased 25.8% to 13 billion yen, from the previous year’s 17 billion yen, due mainly to decreased earnings of several associated companies. | ||
(8) | Net Income | |
As a result of all the factors stated in the preceding paragraphs, net income for fiscal 2001 decreased 58.4% to 42 billion yen. Net income as a percentage of net sales declined to 0.5%, compared with 1.4% a year ago. |
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(9) | Results of Operations | |
Results of operations by business segment, as restated on the basis of the business segment classifications effective from the year ended March 31, 2002, were as follows: | ||
Sales of the AVC Networks segment increased 4.9% from 4,082 billion yen for the year ended March 31, 2000 to 4,280 billion yen for the year ended March 31, 2001. Within this segment, sales of video and audio equipment increased, due mainly to solid sales of color TVs and DVD players worldwide, and digital TVs and compact disc music albums in Japan, which more than offset decreased sales of VCRs and audio equipment. Sales of information and communications equipment also increased, largely due to an expansion in mobile communications equipment, such as cellular phones, along with steady increases in sales of personal computers, CD-R/RW drives and car AV equipment. However, overseas sales of information and communications equipment were down slightly, as they were hampered by a global downturn in the IT industry during the second half of the fiscal year. | ||
With respect to this segment, Matsushita’s segment profit increased 3.0% from 101 billion yen for the year ended March 31, 2000 to 104 billion yen for the year ended March 31, 2001. The sales increase and cost reduction efforts offset the adverse effects of severe market price competition and the appreciation of the yen. | ||
Sales of the Home Appliances segment increased 0.8% from 1,306 billion yen for the year ended March 31, 2000 to 1,316 billion yen for the year ended March 31, 2001. This was principally attributable to the market success of new products, mainly in Japan, such as centrifugal force washer/dryer and a cordless rechargeable vacuum cleaner offering extended continuous operation, and temporary high sales at the fiscal year-end prior to the April 2001 enactment of a home appliance recycling law in Japan. | ||
With respect to this segment, Matsushita’s segment profit increased 28.7% from 42 billion yen for the year ended March 31, 2000 to 55 billion yen for the year ended March 31, 2001, primarily due to its cost reduction efforts despite the adverse effects of declines in market prices of products. | ||
Sales of the Industrial Equipment segment increased 21.3% from 391 billion yen for the year ended March 31, 2000 to 475 billion yen for the year ended March 31, 2001. This was mainly attributable to robust sales of FA equipment, such as electronic parts-mounting machines, mainly for the information and communications equipment industry. | ||
With respect to this segment, Matsushita’s segment profit decreased 11.8% from 20 billion yen for the year ended March 31, 2000 to 18 billion yen for the year ended March 31, 2001, mainly owing to the devaluation of FA equipment inventory despite sales increase. | ||
Sales of the Components and Devices segment increased 5.1% from 2,358 billion yen for the year ended March 31, 2000 to 2,478 billion yen for the year ended March 31, 2001. This was attributable to solid sales in both domestic and overseas markets, in such lines as general electronic components, semiconductors, LCD devices and electric motors, mainly for mobile communications equipment and digital AV products. | ||
With respect to this segment, Matsushita’s segment profit increased 34.1% from 66 billion yen for the year ended March 31, 2000 to 89 billion yen for the year ended March 31, 2001, principally owing to sales increases and efforts to reduce costs, despite the negative impact of price declines. |
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B. | Liquidity and Capital Resources | |
Matsushita’s Liquidity Profile | ||
The two tables below show Matsushita’s cash payment obligations and guarantees and other commercial commitments, broken down by the amount of payments due for each of the periods specified below, as of March 31, 2002: |
Yen (millions) | ||||||||||||||||||||||
Payments Due by Period | ||||||||||||||||||||||
Less than | ||||||||||||||||||||||
Total | 1 year | 1-3 years | 4-5 years | After 5 years | ||||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||||
Long-Term Debt | 953,235 | 263,807 | 379,154 | 200,258 | 110,016 | |||||||||||||||||
Capital Lease Obligations | 4,128 | 1,664 | 1,962 | 482 | 20 | |||||||||||||||||
Operating Leases | 98,158 | 14,483 | 40,792 | 42,883 | — | |||||||||||||||||
Unconditional Purchase Obligations | 6,496 | 6,496 | — | — | — | |||||||||||||||||
Total Contractual Cash Obligations | 1,062,017 | 286,450 | 421,908 | 243,623 | 110,036 | |||||||||||||||||
Yen (millions) | |||||||
Total Amounts Committed | |||||||
Other Commercial Commitments: | |||||||
Letters of Credit | 20,153 | ||||||
Guarantees | 59,521 | ||||||
Total Commercial Commitments | 79,674 | ||||||
Letters of credit generally have contractual lives of less than one year. Loan guarantees are principally provided on behalf of associated companies, customers and retailers and generally have long-term contractual lives coinciding with the maturities of the guaranteed obligations. | ||
In October 2001, Matsushita sold machinery and equipment, which are used to manufacture semiconductors for 44 billion yen. The assets were sold to a special-purpose entity, which in turn leased them back to Matsushita over a period of four years. Sumitomo Mitsui Banking Corporation provided to the special-purpose entity a loan with the same term as that of the resulting leases. The loan paid for approximately 88% of the cost of the machinery and equipment. SMBC Leasing Company, Limited, an affiliate of Sumitomo Mitsui Banking Corporation, owns, through the special-purpose entity, an equity interest in the machinery and equipment, representing approximately 12% of the cost. The leases are classified as operating leases for U.S. GAAP purposes. Matsushita entered into another similar sale and lease-back arrangement in the amount of 64 billion yen in March 2002. |
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On January 10, 2002, Matsushita publicly announced that it would repurchase its own shares in Japan pursuant to Japanese law. Matsushita also announced its intention to hold such repurchased shares as treasury stock to increase capital efficiency, and to use some or all of the repurchased shares for the share exchanges to transform five of its subsidiaries into wholly-owned subsidiaries, (see Section A of Item 4 – Information on the Company). Matsushita set the maximum aggregate purchase amount at 100 billion yen and the maximum aggregate number of shares to be purchased at 60 million shares. The period of purchase began on January 11, 2002 and ended on April 19, 2002. During that period, Matsushita acquired 59,586,000 shares. | ||
Also on January 10, 2002, Matsushita publicly announced that it would issue straight bonds in Japan to raise funds necessary for its future business development, including such needs as working capital, redemption at maturity of outstanding convertible bonds and the repurchase of its shares discussed above. Matsushita had previously set up a shelf registration in Japan for issuances of straight bonds, including those announced on January 10, 2002, with the maximum aggregate principal amount of 500 billion yen within two years from December 29, 2001. On February 14, 2002, Matsushita issued straight bonds in the aggregate principal amount of 300 billion yen. | ||
Matsushita’s policy on Financial Position and Liquidity | ||
As its basic policy, Matsushita has long placed emphasis on maintaining sound balance sheets, and on generating as much available funding as possible from internal sources through efforts to raise the operational efficiency or asset turnover ratios, so as not to overly rely on external fund raising. This conservativeness is exemplified in the tradition of maintaining the ratio of stockholders’ equity to total assets at a relatively high level and keeping a large cash balance. The ratio of stockholders’ equity to total assets as of March 31, 2002 stood at 42.5%, although the total of short-term borrowings and long-term debt increased to 1,200 billion yen as of March 31, 2002, from 1,090 billion yen a year ago. Cash balance (the total of cash and cash equivalents plus time deposits with a maturity of more than three months) also remained at the relatively high level of 1,421 billion yen as of March 31, 2002, increasing slightly from the previous year’s 1,376 billion yen due mainly to decreased inventories and capital investment during fiscal 2002. | ||
With this cash balance, combined with generally high credit ratings from the world’s leading credit rating agencies, Matsushita believes that it has sufficient sources of liquidity for either working capital or long-term investment needs. | ||
As of March 31, 2002, the outstanding balance of short-term borrowings totaled 508 billion yen, and long-term debt was at 692 billion yen. Of the short-term borrowings, 98 billion yen is the current portion (maturity of less than one year) of outstanding convertible bonds. Matsushita’s borrowings are not significantly affected by seasonal factors. (For further details, see Note 7 of the Notes to Consolidated Financial Statements.) Most borrowings are at fixed rates. | ||
In recent years, Matsushita has focused on raising capital efficiency upon review of its balance sheet. As part of this move, the Company initiated an endeavor to achieve more efficient utilization of available cash resources held by subsidiaries and associated companies. This is achieved by lending such cash resources to other Group companies, as necessary, through a network of cash management systems at financial subsidiaries located in each global region. Through this operation, the Company is working on the reduction of both excess cash and borrowings on a consolidated Groupwide basis, along with reducing interest and related cost payments to outside financial institutions, to help realize a lean balance sheet. |
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Regarding the use of financial instruments for hedging purposes, see Item | ||
Fiscal 2002 Financial Position and Liquidity | ||
The Company’s consolidated total assets at the end of fiscal 2002 decreased to 7,627 billion yen, compared with 8,156 billion yen at the end of fiscal 2001. This decline was chiefly a result of a reduction in accounts receivable, caused by lower sales, and a reduction in inventories, along with companywide efforts to reduce capital investment in plant and equipment. | ||
Stockholders’ equity at the end of fiscal 2002 also dropped, to 3,243 billion yen, from 3,773 billion yen in the previous year. This was largely attributable to a decrease in retained earnings caused by the net loss, as well as declines in accumulated other comprehensive income (loss), including minimum pension liability adjustments, despite the positive effect of the yen’s year-end exchange rate on cumulative translation adjustments. The Company’s repurchase of its own shares of common stock in an effort to improve capital efficiency also resulted in reduced stockholders’ equity. | ||
The Company’s capital investment (excluding intangibles) during fiscal 2002 totaled 309 billion yen, a decrease from the previous year’s figure of 504 billion yen. This was mainly in response to a severe business environment, in which the Company cut back capital investment, particularly for components and devices, such as semiconductors. Depreciation (excluding intangibles) during the year also fell, to 323 billion yen, compared with 345 billion yen in the previous year. | ||
Net cash provided by operating activities in fiscal 2002 amounted to 77 billion yen, compared with 392 billion yen in the previous fiscal year. This reduction was primarily attributable to a net loss and a decrease in trade payables that were greater than the decreases in trade receivables and inventories. Net cash used in investing activities amounted to 70 billion yen, compared with 583 billion yen in fiscal 2001, principally owing to an investment decrease in time deposits and a reduction of capital expenditures. Net cash provided by financing activities was 29 billion yen, compared with net cash used in financing activities of 113 billion yen a year ago, due mainly to a decrease in repayments of long-term debt despite an increase in repurchase of common stock. All these activities, compounded by the effect of exchange rate changes, resulted in a net increase of 51 billion yen in cash and cash equivalents during fiscal 2002. Cash and cash equivalents at the end of fiscal 2002 totaled 900 billion yen, compared with 849 billion yen a year ago. These are primarily held in yen (79%) and U.S. dollars (4%). | ||
Commitments for Capital Expenditures | ||
As of March 31, 2002, commitments outstanding for the purchase of property, plant and equipment amounted to 6 billion yen. | ||
C. | Research and Development | |
Matsushita considers research and development to be a key factor in its success and essential to the achievement of its corporate theme: to provide the utmost satisfaction to customers throughout the world through differentiated products and services and to contribute to the progress and happiness of mankind. Under this theme, Matsushita is committed to research and development activities that create next-generation businesses from a mid- to long-term viewpoint, while at the same time supporting current or ongoing products and businesses. |
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The main focus of Matsushita’s research and development activities has been increasingly directed to digital networks and the environment and energy. During the year ended March 31, 2001, in order to speedily address these themes, Matsushita categorized its research and development activities into four main technological areas: multimedia software, devices and environment- and energy-related technologies, semiconductors, and production engineering and quality control. At the same time, Matsushita increased communication and collaboration between corporate research and development centers and divisional technology centers and departments across various product areas. This strategic approach enabled Matsushita to launch several “product firsts” onto the market while at the same time forming the base for the creation of new growth businesses. Matsushita also worked on the expansion of its global research and development networks, establishing a number of research and development centers in North America, Europe and Asia. | ||
Notwithstanding such progress, as part of its “Value Creation 21” plan, Matsushita further reviewed all corporate-wide research and development organizations spanning various divisions in a decentralized manner. As a result of this thorough review, and to enable concentration of research and development resources into strategic areas, Matsushita established a “Strategic Products Development Platform” structure in December 2001. Under this new structure, Matsushita has identified nearly 20 strategic product categories which require even more specialized technologies and to which virtually all corporate-level and divisional-level R&D efforts are concentrated. These strategic product categories include: digital TVs; home AVC servers; AVC mobile; mobile communications; car electronics; home gateways; color printing; home networking; fuel cell cogeneration systems; life line systems; mobile devices; circuit devices; secondary batteries; display devices; lighting devices; and strategic semiconductors. Matsushita plans to establish a development center or development task force for each category, concentrating all relevant development resources. Concurrently, to develop the technologies that support these strategic products, Matsushita established corporate-level core technology development groups, which are responsible for the following areas: multimedia software technology; semiconductor technology; devices, environment and production engineering technologies; and cutting-edge technologies. | ||
Total expenditures for research and development amounted to 526 billion yen, 544 billion yen and 566 billion yen for the three fiscal years ended March 31, 2000, 2001 and 2002, respectively, representing 7.2%, 7.1% and 8.2% of Matsushita’s total net sales for each of those periods. |
D. | Trend Information | |
The slow growth and stagnation of the Japanese economy in recent years and the erosion in the strength of the global economy in recent months, and setbacks in the global IT and related industries that have been continuing for over a year, have had a major negative impact on Matsushita’s results of operations. | ||
During the year ended March 31, 2002, the Japanese economy continued to deteriorate due to stagnant consumer demand and slow capital investment. Growing uncertainty has been mounting about the outlook for the Japanese economy. The U.S. economy has shown modest signs of recovery after a downturn following the terrorist attacks of September 11, 2001, but its outlook remains uncertain at this point. In the meantime, the Asian and European economies have generally weakened. |
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The severe conditions of the Japanese and global economies have caused decreases in Matsushita’s sales in a number of product areas, with significant negative impact on its results of operations in the year ended March 31, 2002. Within its major product categories, Matsushita has been experiencing negative effects on the sales of cellular phones and PC-related products, as well as components and devices and FA equipment. With respect to cellular phones, the slowdown in growth in demand that began in the second half of the year ended March 31, 2001 continued into the year ended March 31, 2002. This contributed to the buildup of industry-wide excess inventory of cellular phones and reduced shipments of Matsushita’s handsets. Similarly, the inventories of personal computers and related products also increased, reflecting the downturn in the market for those products. Meanwhile, Matsushita has suffered substantially reduced orders for components and devices and FA equipment from the global IT industry, as well as declining prices. Matsushita has also been suffering the negative effects of slow consumer spending on its consumer products in Japan, as well as weak overseas demand reflecting the economic slowdowns in the United States and other regions. | ||
Matsushita expects that the sluggish conditions in the domestic market and fierce price competition in Japan and overseas will persist during the current fiscal year, ending March 31, 2003. In this severe business environment, Matsushita will strive to achieve a sales increase by introducing a range of new products, including its “V-Products” which are competitive products that Matsushita believes have the potential to achieve top share in high-volume markets and contribute to the Company’s overall performance. Together with benefits from the restructuring measures implemented during the year ended March 31, 2002, including reduced fixed costs due to the employment restructuring initiatives and the closure or integration of manufacturing locations in and outside Japan, Matsushita aims to realize a recovery in earnings. For fiscal 2003, Matsushita currently expects a reduction in costs of about 119 billion yen as a result of the employment restructuring initiatives, and a savings of approximately 52 billion yen related to the closure or integration of manufacturing locations. However, whether or not Matsushita will succeed in achieving an earnings recovery during the current fiscal year will depend on numerous factors, many of which are beyond Matsushita’s control. As a mid-term growth strategy, Matsushita will implement a comprehensive Groupwide business and organizational restructuring upon transforming five of its subsidiaries into wholly-owned subsidiaries in the second half of the current fiscal year ending March 31, 2003. Matsushita currently expects that any positive effects of such Group restructuring will arise in or after the next fiscal year. | ||
In June 2002, the Company and certain of its domestic subsidiaries obtained approval from the Ministry of Health, Labour and Welfare (the Ministry) for an exemption from the future benefit obligation with respect to the substitutional portion of each Employees Pension Fund (EPF) that the Company and certain of its domestic subsidiaries operate on behalf of the government in accordance with Japanese Welfare Pension Insurance Law, following the enactment in April 2001 of a new law concerning the defined benefit pension plans in Japan. The Company and certain of its domestic subsidiaries will apply for the return of the past benefit obligation of the substitutional portion of each EPF. Settlement of the past benefit obligation of the substitutional portion and the return of the pension assets to the government will be carried out by December 15, 2003. Matsushita currently expects that any positive effects of an exemption from the future benefit obligation and the settlement of the past benefit obligation with respect to the substitutional portion of each EPF will principally arise in the next fiscal year. |
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E. | Accounting Principles | |
Critical Accounting Policies | ||
The Company has identified the following critical accounting policies which are important to its financial condition and results of operations, and require management’s judgments. | ||
Long-lived Assets | ||
The useful lives of property, plant and equipment are summarized in Note 1(o) to the consolidated financial statements included in this annual report and reflect the estimated period that the Company expects to derive economic benefit from their use. In estimating the useful lives and determining whether subsequent revisions to the useful lives are necessary, the Company considers the likelihood of technological obsolescence, changes in demand for the products related to such equipment, and other factors which may affect their utility. The effect of any future changes to the estimated useful lives of the equipment and machinery could be significant to the Company’s results of operations. | ||
Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows (undiscounted and without interest charges) expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Factors which may contribute to the need for future impairment charges include changes in the use of the assets resulting from the Company’s restructuring initiatives, technological changes or any significant declines in the demand for the related products. | ||
Valuation of Available-for-sale Securities | ||
The Company holds available-for-sale securities included in short-term investments and investments and advances. Available-for-sale securities are carried at fair value with unrealized holding gains and losses included as a component of accumulated other comprehensive income (loss), net of applicable taxes. | ||
Individual securities classified as available-for-sale are reduced to net realizable value by a charge to income for other than temporary declines in fair value. Management regularly reviews each investment security for impairment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline and the financial health of and specific prospects for the issuer. |
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Valuation of Inventory | ||
Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make a sale. The Company routinely reviews its inventories for their saleability and for indications of obsolescence to determine if inventories should be written-down to net realizable value. Judgments and estimates must be made and used in connection with establishing such allowances in any accounting period. In estimating the net realizable value of its inventories, the Company considers the age of the inventory and the likelihood of spoilage or changes in market demand for its inventories. | ||
Warranties | ||
The Company makes estimates of potential warranty claims related to its revenues. The Company provides for such costs based upon historical experience and its estimate of the level of future claims. Management makes judgments and estimates in connection with establishing the warranty reserve in any accounting period. Differences may result in the amount and timing of its revenue for any period if the Company makes different judgments or utilizes different estimates. | ||
Valuation of Accounts Receivable and Noncurrent Receivables | ||
The Company reviews its accounts receivable on a periodic basis and provides an allowance for doubtful receivables based on historical loss experience and current economic conditions. In evaluating the collectibility of individual receivable balances, the Company considers the age of the balance, the customers’ historical payment history, their current credit-worthiness and adequacy of collateral. | ||
The Company records noncurrent receivables at cost, less the related allowance for impaired receivables. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is considered to be impaired, the amount of impairment is measured based on the present value of expected future cash flows or the fair value of the collateral. Cash receipts on impaired receivables are applied to reduce the principal amount of such receivables until the principal has been recovered and are recognized as interest income thereafter. Management’s judgment is required in making estimates of the future cash flows of an impaired loan. Such estimates are based on current economic conditions and the current and expected financial condition of the debtor. |
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Accounting for Derivatives | ||
The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company uses derivative instruments principally to manage foreign currency risks resulting from transactions denominated in currencies other than the Japanese yen. As discussed in Note 1(n) to the consolidated financial statements included in this annual report, the Company recognizes all derivatives as either assets or liabilities on the balance sheet at their fair value. Changes in the fair value of those derivatives are reported in earnings or other comprehensive income depending on their use and whether they qualify for hedge accounting. The accounting for gains and losses associated with changes in the fair value of the derivative depends on its hedge designation and whether the hedge is highly effective in achieving offsetting changes in the fair values or cash flows of the hedged item. The Company evaluates and determines on a continuous basis if the derivative remains highly effective in offsetting changes in the fair value or cash flows of the hedged item. If the derivative ceases to be highly effective in offsetting changes in the fair value or cash flows of the hedged item, the Company discontinues hedge accounting prospectively. Because the derivatives the Company uses are not complex, significant judgment is not required to determine their fair values. Fair values are determined principally by receiving quotations from banks or brokers. | ||
Loss Contingencies | ||
Loss contingencies may from time to time arise from situations such as product liability claims, disputes over intellectual property rights, and other legal actions. Loss contingencies are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will exceed the recorded provision. Contingent liabilities are often resolved over long time periods. In recording liabilities for probable losses, management is required to make estimates and judgments regarding the amount or range of the probable loss. Management continually assesses the adequacy of estimated loss contingencies and, if necessary, adjusts the amounts recorded as better information becomes known. |
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New Accounting Pronouncements | ||
The Company will adopt Emerging Issues Task Force Issue (EITF) 01-9 “Accounting for Consideration Given by a Vender to a Customer or Reseller of the Vendor’s Products” in the fiscal year beginning April 1, 2002. The Company does not expect that the adoption of EITF 01-9 will materially affect the results of operations or financial position. | ||
In June 2001, FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that all business combinations be accounted for by the purchase method and changes the criteria for recognition of intangible assets acquired in business combinations. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. SFAS No. 142 will require that goodwill and intangible assets that have indefinite useful lives no longer be amortized but should be tested at least annually for impairment. Intangible assets that have estimable useful lives will continue to be amortized over their useful lives. SFAS No. 142 also provides specific guidance for testing for impairment of goodwill and intangibles with indefinite useful lives. The provisions of SFAS No. 142 will be effective from the fiscal year beginning April 1, 2002, however, goodwill and intangible assets acquired after June 30, 2001, will be subject immediately to the nonamortization and amortization provisions of SFAS No. 142. The adoption of SFAS No. 141 did not have a material effect on the Company’s results of operations or financial position. The Company does not expect that the adoption of SFAS No. 142 will materially affect the results of operations or financial position. | ||
In June 2001, FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) normal operation of a long-lived asset, except for certain obligations of lessees. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and subsequently allocated to expense over the asset’s useful life. The Company will adopt the provisions of SFAS No. 143 on April 1, 2003. The Company does not expect that the adoption will materially affect the results of operations or financial position. | ||
In August 2001, FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” applicable for the fiscal year beginning April 1, 2002. SFAS No. 144 amends the existing guidance on accounting for the impairment of long-lived assets to be held or used, establishes one accounting model to be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. The Company does not expect that the adoption of SFAS No. 144 will materially affect the results of operations or financial position. |
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Item6.Directors, Senior Management and Employees
A. | Directors and Senior Management | |
The Articles of Incorporation of the Company provide that the number of Directors of the Company shall be three or more and that of Corporate Auditors shall be three or more. Directors and Corporate Auditors shall be elected by the general meeting of shareholders. The Board of Directors has ultimate responsibility for administration of the Company’s affairs. Directors may, by resolution of the Board of Directors, appoint a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a President and Director, and one or more Executive Vice Presidents and Directors, Senior Managing Directors, and Managing Directors. The Chairman of the Board of Directors, Vice Chairman of the Board of Directors, President and Director, Executive Vice Presidents and Directors, Senior Managing Directors, and Managing Directors are Representative Directors and severally represent the Company. The term of office of Directors shall expire at the conclusion of the ordinary general meeting of shareholders with respect to the last closing of accounts within two years from their assumption of office, and in the case of Corporate Auditors, within three years from their assumption of office. However, they may serve any number of consecutive terms. | ||
The Corporate Auditors of the Company are not required to be, and are not certified public accountants. However, at least one of the Corporate Auditors should be a person who has not been a Director, general manager or employee of the Company or any of its subsidiaries during the five-year period prior to his election as a Corporate Auditor. Each Corporate Auditor has the statutory duty to examine the financial statements and business reports to be submitted by the Board of Directors at the general meeting of shareholders and also to supervise the administration by the Directors of the Company’s affairs. The Corporate Auditors are required to attend meetings of the Board of Directors and express opinions, if necessary, at such meetings, but they are not entitled to vote. | ||
The Corporate Auditors constitute the Board of Corporate Auditors. The Board of Corporate Auditors has a statutory duty to prepare and submit its audit report to the Board of Directors each year. A Corporate Auditor may note his opinion in the audit report if his opinion is different from the opinion expressed in the audit report. The Board of Corporate Auditors is empowered to establish audit principles, methods of examination by the Corporate Auditors of the Company’s affairs and financial position and other matters concerning the performance of the Corporate Auditors’ duties. | ||
The Corporate Auditors may not at the same time be Directors, managers or employees of the Company. |
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The following table shows information about Matsushita’s Directors and Corporate Auditors after the ordinary general meeting of shareholders held on June 27, 2002, including their dates of birth, positions, responsibilities and their brief personal records. |
Name | Positions, responsibilities and brief personal records | ||
(Date of birth) | |||
Yoichi Morishita | Chairman of the Board of Directors – since June 2000 | ||
(Jun. 23, 1934) | - -1987 | Director of the Company; | |
- -1992 | Executive Vice President and Director of the Company; | ||
- -1993 | President and Director of the Company. | ||
Masayuki Matsushita | Vice Chairman of the Board of Directors – since June 2000 | ||
(Oct. 16, 1945) | - -1986 | Director of the Company; | |
- -1992 | Senior Managing Director of the Company; | ||
- -1996 | Executive Vice President and Director of the Company. | ||
Kunio Nakamura | President and Director – since June 2000 | ||
(Jul. 5, 1939) | - -1993 | Director of the Company, and Director of Corporate Management Division for the Americas; | |
- -1996 | Managing Director of the Company; | ||
- -1997 | Senior Managing Director of the Company, and President of AVC Company. | ||
Atsushi Murayama | Executive Vice President and Director – since June 2000 | ||
(Mar. 29, 1938) | In charge of Planning, Personnel and General Affairs. | ||
- -1995 | Director of the Company; | ||
- -1997 | Managing Director of the Company; | ||
- -1998 | Senior Managing Director of the Company. | ||
Takashi Kawada | Executive Vice President and Director – since June 2001 | ||
(Mar. 13, 1937) | In charge of Communications and Automotive Electronics Business. | ||
- -1989 | Director of Matsushita Communication Industrial Co., Ltd. (MCI); | ||
- -1993 | President of MCI. |
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Name | Positions, responsibilities and brief personal records | ||
(Date of birth) | |||
Kazuo Toda | Senior Managing Director – since June 1999 | ||
(Feb. 13, 1941) | In charge of Corporate Marketing Division for Panasonic Brand, Corporate Marketing Division for National Brand, Corporate Consumer Products Distribution Division, Corporate Commodity Sales, Housing Equipment Sales, Electrical Supplies Sales, Advertising, Logistics, and Corporate CS Division. | ||
-1994 | Director of the Company, and in charge of Home Appliance Business; | ||
- -1996 | Managing Director of the Company; | ||
- -1997 | President of Home Appliance & Housing Electronics Company; | ||
- -2000 | President of AVC Company; | ||
- -2001 | Director of Corporate Marketing Division for Panasonic Brand. | ||
Osamu Tanaka | Senior Managing Director – since June 1999 | ||
(Nov. 1, 1940) | Tokyo Representative, and in charge of Public and Private Institutions, Recycling Business Promotion and Panasonic Center. | ||
- -1995 | Director of the Company, and Director of Corporate Consumer Sales Division; | ||
- -1997 | Managing Director of the Company; | ||
- -1999 | In charge of Corporate Consumer Sales; | ||
- -2001 | In charge of Corporate Consumer Products Distribution Division and Public and Private Institutions. | ||
Sukeichi Miki | Senior Managing Director – since June 2001 | ||
(Feb. 5, 1940) | In charge of Technology, Intellectual Property and Overseas Research Laboratories. | ||
- -1997 | Director of the Company, and in charge of Multimedia Technology; | ||
- -1999 | Managing Director of the Company, and in charge of Technology and Overseas Research Laboratories; | ||
- -2000 | In charge of Intellectual Property. | ||
Yukio Shohtoku | Managing Director – since June 1999 | ||
(Nov. 8, 1939) | In charge of Overseas Operations. | ||
- -1993 | Associate Director of Corporate Management Division for Asia, Oceania and the Middle East; | ||
- -1994 | Director of the Company, and Director of Corporate Management Division for China; | ||
- -2000 | In charge of Overseas Operations. |
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Name | Positions, responsibilities and brief personal records | ||||||
(Date of birth) | |||||||
Takami Sano | Managing Director – since June 2000 | |||||
(Apr. 2, 1943) | In charge of Industrial Sales, Semiconductor Sales, Factory Automation Sales and Automotive Electronics Sales, Director of Corporate Industrial Marketing & Sales Division, and President of Factory Automation Company. | |||||
- -1992 | Director of Matsushita Battery Industrial Co., Ltd.; | |||||
- -1998 | Director of the Company, and Director of Corporate Industrial Marketing & Sales Division. | |||||
Susumu Koike | Managing Director – since June 2000 | |||||
(Nov. 15, 1945) | In charge of Device Technology, Environmental Technology, Production Engineering and Recycling Process Systems Business, and President of Semiconductor Company. | |||||
- -1993 | Director of Matsushita Electronics Corporation; | |||||
- -1998 | Director of the Company, and in charge of Semiconductor Technology; | |||||
- -2001 | President of Semiconductor Company. | |||||
Fumio Ohtsubo | Managing Director – since June 2000 | |||||
(Sep. 5, 1945) | President of AVC Company, and Business Group Executive of AVC Network Business Group, and in charge of Storage Device Business. | |||||
- -1998 | Director of the Company, and Vice President of AVC Company; | |||||
- -2001 | Business Group Executive of AVC Network Business Group. | |||||
Haruo Ueno | Managing Director – since June 2001 | |||||
(Nov. 9, 1940) | Director of Corporate Legal Affairs Division. | |||||
- -1965 | Joined the National Police Agency; | |||||
- -1994 | Joined the Company as Advisor; | |||||
- -1998 | Director of the Company, and Director of Corporate Legal Affairs Division. | |||||
Hidetsugu Otsuru | Managing Director – since June 2001 | |||||
(Aug. 20, 1943) | President of Display Devices Company, and in charge of Quality and Environment. | |||||
- -1998 | Director of the Company, and in charge of Corporate Quality Administration Division and Purchasing Administration Department; | |||||
- -1999 | President of Matsushita Electronics Corporation; | |||||
- -2001 | President of Display Devices Company. | |||||
Yoshiaki Kushiki | Managing Director – since June 2001 | |||||
(Jan. 17, 1946) | In charge of Multimedia Technology and Software Technology. | |||||
- -1997 | Director of Multimedia Development Center; | |||||
- -1999 | Director of the Company, and in charge of Multimedia Technology. |
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Name | Positions, responsibilities and brief personal records | |
(Date of birth) | ||
Josei Ito | Director – since June 1994 | |
(May 25, 1929) | (Chairman of the Board of Nippon Life Insurance Co.) | |
-1989 | President of Nippon Life Insurance Co.; | |
-1997 | Chairman of the Board of Nippon Life Insurance Co. | |
Toshio Morikawa | Director – since June 2000 | |
(Mar. 3, 1933) | (Executive Advisor of Sumitomo Mitsui Banking Corporation) | |
-1997 | Chairman of the Board of The Sumitomo Bank, Ltd.; | |
-2001 | Executive Advisor of Sumitomo Mitsui Banking Corporation. | |
Hiroaki Enomoto | Director – since June 1996 | |
(Nov. 3, 1942) | Director of Tokyo Branch, and in charge of Public and Private Institutions. | |
-1965 | Joined the Ministry of International Trade & Industry; | |
-1995 | Joined the Company as Corporate Advisor; | |
-1998 | Director of Tokyo Branch, and in charge of Public and Private Institutions. | |
Toshio Sugiura | Director – since June 1997 | |
(Sep. 20, 1941) | Director of Corporate Management Division for China and Northeast Asia. | |
-1995 | President of Matsushita Electric Co., (Malaysia) Bhd.; | |
-1997 | President of Air-conditioner Company; | |
-2000 | Director of Corporate Management Division for China. | |
Tetsuya Kawakami | Director – since June 2000 | |
(Dec. 7, 1941) | In charge of Finance and Accounting. | |
-1996 | General Manager of Corporate Accounting Department. | |
Hideaki Iwatani | Director – since June 2000 | |
(Jul. 21, 1945) | Director of Corporate Management Division for the Americas. | |
-1996 | President of Panasonic Consumer Electronics Company in Matsushita Electric Corporation of America; | |
-2000 | Director of Corporate Management Division for the Americas. | |
Yoshitaka Hayashi | Director – since June 2000 | |
(Jun. 7, 1946) | In charge of Appliance Business, President of Home Appliance & Housing Electronics Company and Air-conditioner Company, and in charge of Packaged Air-conditioner Company and Healthcare & Medical Business Center. | |
-1999 | Vice President of Home Appliance & Housing Electronics Company; | |
-2000 | President of Home Appliance & Housing Electronics Company; | |
-2001 | Director of Corporate Marketing Division for National Brand. |
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Name | Positions, responsibilities and brief personal records | |
(Date of birth) | ||
Toshihiro Sakamoto | Director – since June 2000 | |
(Oct. 27, 1946) | Senior Vice President of AVC Company, and Business Group Executive of Visual Network Products Business Group. | |
-1998 | President of Matsushita Electric (Taiwan) Co., Ltd.; | |
-2000 | Vice President of AVC Company. | |
Masaki Akiyama | Director – since June 2001 | |
(Jun. 29, 1943) | Director of Corporate System Sales Division and Corporate Systems Solutions Division. | |
-1994 | Director of Matsushita Communication Industrial Co., Ltd. (MCI); | |
-1998 | Senior Managing Director of MCI; | |
-2000 | Director of Corporate Systems Solutions Division. | |
Yoichiro Maekawa | Director – since June 2001 | |
(Jan. 6, 1944) | Director of Corporate e-Net Business Division. | |
-1997 | General Manager of Corporate Planning Office; | |
-2000 | Director of Corporate e-Net Business Division. | |
Tomikazu Ise | Director – since June 2001 | |
(Dec. 23, 1946) | Director of Corporate Management Division for Europe. | |
-1998 | President of Panasonic Deutschland GmbH; | |
-1999 | President of Panasonic Marketing Europe GmbH; | |
-2000 | Director of Corporate Management Division for Europe. | |
Masaharu Matsushita (Sep. 17, 1912) | Honorary Chairman of the Board of Directors and Executive Advisor – since June 2000 | |
-1947 | Director of the Company; | |
-1961 | President and Director of the Company; | |
-1977 | Chairman of the Board of Directors of the Company. | |
Motoi Matsuda | Senior Corporate Auditor – since June 2000 | |
(Feb. 11, 1937) | -1993 | Director of the Company, and in charge of Finance and Accounting; |
-1998 | Senior Managing Director of the Company. | |
Yoshitomi Nagaoka | Senior Corporate Auditor – since June 2001 | |
(May 31, 1941) | -1996 | Director of the Company, and in charge of AVC Technology; |
-1997 | Vice President of AVC Company, in charge of Technology. | |
Toshiomi Uragami | Corporate Auditor – since June 2000 | |
(Nov. 4, 1935) | (Executive Advisor of Sumitomo Life Insurance Co.) | |
-1997 | Chairman of the Board of Sumitomo Life Insurance Co.; | |
-2001 | Executive Advisor of Sumitomo Life Insurance Co. |
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Name | Positions, responsibilities and brief personal records | |
(Date of birth) | ||
Kiyosuke Imai | Corporate Auditor – since June 2000 | |
(Nov. 14, 1934) | (Chairman of the Board of Matsushita Electric Works, Ltd.) | |
-1994 | President of Matsushita Electric Works, Ltd.; | |
-2000 | Chairman of the Board of Matsushita Electric Works, Ltd. |
There are no family relationships between any Director or Corporate Auditor and any other Director or Corporate Auditor of the Company except as described below: | ||
Masayuki Matsushita, Vice Chairman of the Board of Directors is the son of Masaharu Matsushita, Honorary Chairman of the Board of Directors and Executive Advisor. | ||
B. | Compensation | |
The aggregate amount of remuneration, including bonuses, paid by the Company during fiscal 2002 to all Directors and Corporate Auditors (38 persons) for services in all capacities was 1,166 million yen. | ||
In accordance with customary Japanese business practices, a retiring Director or Corporate Auditor receives a lump-sum retirement payment, which is subject to approval of the general meeting of shareholders. Retirement allowances provided for Directors and Corporate Auditors for fiscal 2002 amounted to 294 million yen. | ||
For details of the Company’s stock option plans for Board members and select senior executives, see Section E of this Item 6. | ||
C. | Board Practices | |
For information on the Company’s Directors and Statutory Auditors, see Section A of this Item 6. | ||
Pursuant to the home country practices exception granted by the New York Stock Exchange, Matsushita is permitted to follow corporate governance practices complying with relevant Japanese laws and Japanese stock exchange rules, which are different from those followed by U.S. domestic companies under the New York Stock Exchange’s listing standards. The New York Stock Exchange rules and Matsushita’s current practices relating to corporate governance have the following significant differences: |
• | Audit Committee.The New York Stock Exchange requires that a listed company have an audit committee consisting of at least three independent directors, and that the audit committee be charged with the responsibility of selecting, monitoring and communicating with the outside auditor of the company to ensure the outside auditor’s independence. Pursuant to the home country practices exception, Matsushita does not have an audit committee with functions called for by the New York Stock Exchange rules. Under the Commercial Code of Japan, Matsushita has the Board of Corporate Auditors which is under a statutory duty to monitor, review and report on the administration of the affairs of the Company, as discussed in Section A of this Item 6. |
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• | Shareholder Approval Policy.The New York Stock Exchange requires that shareholder approval be obtained prior to issuance of stock options to officers or directors except, among others, where no single officer or director may acquire more than 1% of the number of common stock outstanding at the time the stock option plan is adopted, and where the stock option plan, together with all plans of the issuer other than those for which shareholder approval is not required, does not authorize the issuance of more than 5% of the issuer’s common stock outstanding at the time the stock option plan is adopted. Pursuant to the home country practices exception, Matsushita follows relevant Japanese laws which, as discussed in Section B of Item 10, generally require it to obtain shareholder approval if stock options are to be issued with “specially favorable” conditions. |
The New York Stock Exchange also requires that, with certain exceptions specified in its rules, shareholder approval be obtained prior to issuance of common stock or securities convertible into or exercisable for common stock (1) to a director, an officer, a substantial security holder or a party related to any of them if the number of shares of common stock which are to be issued or are issuable upon conversion exceeds 1% of the number of common stock or voting power outstanding before the issuance, (2) in any transaction or series of transactions, if the voting power of the common stock is equal to or exceeds 20% of the voting power outstanding before the issuance or if the number of shares of the common stock is equal to or exceeds 20% of the number of shares outstanding before the issuance, and (3) that will result in a change of control of the issuer. Pursuant to the home country practices exception, Matsushita only follows relevant Japanese laws which, as discussed in Section B of Item 10, generally require it to obtain shareholder approval with respect to the issuance of common stock or securities convertible into or exercisable for common stock if common stock is to be issued at a “specially favorable” price or convertible bonds or debentures to acquire shares are to be issued with “specially favorable” conditions or stock acquisition rights to acquire shares are to be issued with “specially favorable” conditions. |
On June 6, 2002, the Corporate Accountability and Listing Standards Committee of the New York Stock Exchange issued a report recommending that the Exchange adopt significant changes to its corporate governance listing standards. The report also contains several recommended changes to the Securities and Exchange Commission’s disclosure and corporate governance requirements. The New York Stock Exchange has stated that it plans to submit the proposals for approval to its Board of Directors in August 2002 and then would submit them to the Securities and Exchange Commission for approval. Under the current proposals, non-U.S. issuers such as Matsushita would continue to be permitted to follow home country practices with respect to corporate governance requirements. If and when the proposed rules are finally adopted after the Securities and Exchange Commission’s approval, there would be additional significant differences other than those discussed above between the New York Stock Exchange rules and Matsushita’s current practices relating to corporate governance. | ||
The rights of ADR holders, including their rights relating to corporate governance practices, are governed by the Amended and Restated Deposit Agreement (incorporated by reference to the Registration Statement on Form F-6 (File No. 333-12694) filed on October 4, 2000). |
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D. | Employees | |
The following table lists the number of consolidated full-time employees of the Company as of March 31, 2002, 2001 and 2000: |
2002 | 2001 | 2000 | |||||||||||||
Employees: | |||||||||||||||
Domestic | 124,212 | 143,162 | 146,675 | ||||||||||||
Overseas | 142,984 | 149,628 | 143,773 | ||||||||||||
Total | 267,196 | 292,790 | 290,448 | ||||||||||||
Most regular employees in Japan, except management personnel, are union members, principally of the Matsushita Electric Industrial Workers Union, which is affiliated with the Japanese Electrical Electronic & Information Union. | ||
As is customary in Japan, Matsushita negotiates annually with the unions and grants annual wage increases and semiannual bonuses. Matsushita also renews the terms and conditions of labor contracts, other than those relating to wages and bonuses, every other year. In recent years, Matsushita has been introducing in Japan new comprehensive employment and personnel systems to satisfy the diversified needs of employees. | ||
Such systems include an individual performance-oriented annual salary system, a regional-based employee remuneration system and an alternative payment system under which employees can receive retirement and fringe benefits up front as an addition to their monthly salary. | ||
For a quarter century, Matsushita has not experienced any major labor strikes or disputes. Matsushita considers its labor relations to be excellent. | ||
The number of voluntary retirees of special early retirement programs implemented for the employees of Matsushita in Japan in the year ended March 31, 2002 was approximately 13,000. They all retired by March 31, 2002. |
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E. | Share Ownership | |
(1) | The following table lists the number of shares owned by the Directors and Corporate Auditors of the Company as of June 27, 2002. The total is 17,354,622 shares constituting 0.81% of all outstanding shares of the Company’s common stock. |
Number of Matsushita Shares | ||||||
Name | Position | Owned as of June 27, 2002 | ||||
Yoichi Morishita | Chairman of the Board of Directors | 75,305 | ||||
Masayuki Matsushita | Vice Chairman of the Board of Directors | 7,884,721 | ||||
Kunio Nakamura | President and Director | 26,000 | ||||
Atsushi Murayama | Executive Vice President and Director | 24,164 | ||||
Takashi Kawada | Executive Vice President and Director | 5,815 | ||||
Kazuo Toda | Senior Managing Director | 20,235 | ||||
Osamu Tanaka | Senior Managing Director | 18,750 | ||||
Sukeichi Miki | Senior Managing Director | 14,000 | ||||
Yukio Shohtoku | Managing Director | 22,277 | ||||
Takami Sano | Managing Director | 18,033 | ||||
Susumu Koike | Managing Director | 12,562 | ||||
Fumio Ohtsubo | Managing Director | 15,000 | ||||
Haruo Ueno | Managing Director | 21,000 | ||||
Hidetsugu Otsuru | Managing Director | 14,000 | ||||
Yoshiaki Kushiki | Managing Director | 9,000 | ||||
Josei Ito | Director | 3,000 | ||||
Toshio Morikawa | Director | 5,000 | ||||
Hiroaki Enomoto | Director | 18,000 | ||||
Toshio Sugiura | Director | 8,030 | ||||
Tetsuya Kawakami | Director | 7,167 | ||||
Hideaki Iwatani | Director | 7,000 | ||||
Yoshitaka Hayashi | Director | 10,798 | ||||
Toshihiro Sakamoto | Director | 6,278 | ||||
Masaki Akiyama | Director | 7,000 | ||||
Yoichiro Maekawa | Director | 18,274 | ||||
Tomikazu Ise | Director | 10,712 | ||||
Masaharu Matsushita | Honorary Chairman of the Board of Directors and Executive Advisor | 9,034,980 | ||||
Motoi Matsuda | Senior Corporate Auditor | 16,840 | ||||
Yoshitomi Nagaoka | Senior Corporate Auditor | 14,681 | ||||
Toshiomi Uragami | Corporate Auditor | 3,000 | ||||
Kiyosuke Imai | Corporate Auditor | 3,000 | ||||
Total | 17,354,622 | |||||
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In May 1998, the Board of Directors decided to implement the Company’s first stock option plan for Board members and select senior executives, and to purchase the Company’s own shares for transfer to them under the plan, pursuant to Article 210-2 of the Japanese Commercial Code. Upon approval at the ordinary general meeting of shareholders held in June 1998 and subsequent Board of Directors’ resolutions, stock options (rights to purchase common shares) were provided to the then 32 Directors on the Board and four select senior executives in amounts ranging from 2,000 to 10,000 shares of common stock each, exercisable from July 1, 2000 to June 30, 2004, at an exercise price of 2,291 yen per share, which was calculated by a formula approved by shareholders at the said annual shareholders meeting. To cover these options, the Company in early July 1998 purchased on the Tokyo Stock Exchange (TSE) a total of 113,000 shares of common stock with an aggregate purchase price of approximately 252 million yen. | ||
At the ordinary general meeting of shareholders held in June 1999, the shareholders again approved a stock option plan for Board members and select senior executives. The then 32 Directors on the Board and four select senior executives were granted stock options at a price of 2,476 yen per share, exercisable from July 1, 2001 to June 30, 2005, ranging from 2,000 to 10,000 shares of common stock each. For this purpose, the Company in early August 1999 purchased on the TSE a total of 116,000 shares of common stock with an aggregate purchase price of approximately 287 million yen. | ||
In June 2000, another stock option plan for Board members and select senior executives was approved at the ordinary general meeting of shareholders. The then 28 Directors on the Board and five select senior executives were granted stock options ranging from 2,000 to 10,000 shares of common stock each, at a price of 2,815 yen per share, exercisable from July 1, 2002 through June 30, 2006. For the stock option plan, the Company in early July 2000 purchased on the TSE a total of 109,000 shares of common stock with an aggregate purchase price of approximately 306 million yen. | ||
In June 2001, another stock option plan for Board members and select senior executives was approved at the ordinary general meeting of shareholders. The then 30 Directors on the Board and nine select senior executives were granted stock options ranging from 2,000 to 10,000 shares of common stock each, at a price of 2,163 yen per share, exercisable from July 1, 2003 through June 30, 2007. For the stock option plan, the Company in early July 2001 purchased on the TSE a total of 128,000 shares of common stock with an aggregate purchase price of approximately 250 million yen. | ||
In June 2002, the Company obtained approval of the ordinary general meeting of shareholders regarding the issue of stock acquisition rights as stock options (the Stock Acquisition Rights) for Board members and select senior executives, pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code, as amended. Upon the shareholders’ approval, the Board of Directors has adopted resolutions to issue at no charge an aggregate of 116 Stock Acquisition Rights, each representing a stock option to purchase 1,000 shares of common stock of the Company, to the current 27 Directors on the Board and eight select senior executives. The Stock Acquisition Rights are exercisable during the period from July 1, 2004 through June 30, 2008. The amount to be paid by qualified persons upon exercise of each Stock Acquisition Right is set at 1,734 yen per share of common stock. |
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(2) | The Company’s full-time employees are eligible to participate in the Matsushita Electric Employee Shareholding Association, whereby participating employees contribute a portion of their salaries to the Association and the Association purchases shares of the Company’s common stock on their behalf. The Company provides a 10% subsidy on top of any funds employees contribute to the Association. As of March 31, 2002, the Association owned 29,337 thousand shares of the Company’s common stock constituting 1.37% of all outstanding shares of the Company’s common stock. |
Item7.Major Shareholders and Related Party Transactions
A. | Major Shareholders | |
(1) | To the knowledge of the Company, no shareholders beneficially own more than five percent of the Company’s common stock, which is the only class of stock it has issued. The ten largest shareholders of record and their share holdings as of the end of the last fiscal year are as follows: |
Share ownership | ||||||||
(in thousands of | Percentage of total | |||||||
Name | shares) | issued shares | ||||||
Sumitomo Mitsui Banking Corporation | 97,648 | 4.56 | % | |||||
Japan Trustee Services Bank, Ltd. (trust account) | 96,773 | 4.52 | ||||||
Moxley & Co. | 95,319 | 4.45 | ||||||
Sumitomo Life Insurance Co. | 76,764 | 3.58 | ||||||
The Mitsubishi Trust and Banking Co. (trust account) | 67,632 | 3.16 | ||||||
Nippon Life Insurance Co. | 65,751 | 3.07 | ||||||
Matsushita Investment & Development Co., Ltd. | 55,229 | 2.58 | ||||||
UFJ Trust Bank Ltd. (trust account A) | 42,230 | 1.97 | ||||||
The Asahi Bank, Ltd. | 41,704 | 1.95 | ||||||
Mitsui Sumitomo Insurance Co., Ltd. | 34,445 | 1.61 |
Except as otherwise provided by law or by the Company’s Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by a majority of the shares having voting rights represented at the meeting. The Commercial Code and the Company’s Articles of Incorporation provide, however, that the quorum for the election of Directors and Corporate Auditors shall not be less than one-third of the total number of voting rights of all the shareholders. The Company’s shareholders are not entitled to cumulative voting in the election of Directors. A corporate shareholder, more than one-quarter of whose total voting rights are directly or indirectly owned by the Company, may not exercise its voting rights in respect of the shares of the Company. The Company has no voting rights with respect to its own common stock. Shareholders may exercise their voting rights through proxies provided that the proxies are also shareholders holding voting rights. The Company’s shareholders also may cast their votes in writing. Shareholders may also exercise their voting rights by electronic means when the Board of Directors decides to permit such method of exercising voting rights. |
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The Commercial Code provides that in order to amend the Articles of Incorporation and in certain other instances, including a reduction of the stated capital, the removal of a Director or a Corporate Auditor, dissolution, merger or consolidation of the Company requiring shareholders resolutions, the transfer of the whole or an important part of the business, the taking over of the whole of the business of any other corporation, share exchange or share transfer requiring shareholders resolutions for the purpose of establishing 100% parent-subsidiary relationships, splitting of the corporation into two or more corporations requiring shareholders resolutions, any offering of new shares at a “specially favorable” price (or any offering of stock acquisition rights to subscribe for or acquire shares of capital stock (“stock acquisition rights”) or bonds with stock acquisition rights at a “specially favorable” exercise conditions) to any persons other than shareholders, the quorum shall be a majority of the total number of shares having voting rights outstanding and the approval of the holders of at least two-thirds of the shares having voting rights represented at the meeting is required (the “special shareholders resolution”). | ||
(2) | As of March 31, 2002, approximately 8.58% of the Company’s common stock was owned by 176 United States shareholders including the ADR Depositary’s nominee, Moxley & Co., considered as one shareholder of record, owning approximately 4.45 % of the total common stock. | |
(3) | Matsushita is not, directly or indirectly, owned or controlled by other corporations, by the Japanese government or any foreign government or by any natural or legal person or persons severally or jointly. | |
(4) | As far as is known to the Company, there is no arrangement, the operation of which may at a subsequent date result in a change in control of Matsushita. |
B. | Related Party Transactions | |
Matsushita is not a party to any material related party transactions. |
C. | Interests of Experts and Counsel | |
Not applicable |
Item8.Financial Information
A. | Consolidated Statements and Other Financial Information | |
(1) | Consolidated Statements | |
Refer to Consolidated Financial Statements and Notes to Consolidated Financial Statements (see Item 17). | ||
Finished goods and materials sent out of Japan are mainly bound for consolidated subsidiaries of the Matsushita Group, and are not, therefore, recorded as exports on a consolidated basis. For this reason, the proportion of exports to total net sales is not significant. |
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(2) | Legal Proceedings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In November 1991, Loral Fairchild Corporation, a Delaware corporation, filed two lawsuits in the United States District Court for the District of Virginia against the Company, Matsushita Electric Corporation of America and 36 other defendants. The suits were consolidated. All defendants were charged with infringement of two U.S. patents by virtue of the production abroad and sale in the United States of certain charge coupled devices (CCDs), which are used in products such as video cameras and facsimile machines. In December 1991, this action was transferred to the United States District Court for the Eastern District of New York. The action seeks damages, attorneys’ fees and a permanent injunction. The Company has asserted that the patents are invalid and not infringed upon by its products incorporating CCDs. This litigation has been bifurcated between liability and damages and has been stayed as to all defendants except one defendant. In a first liability trial involving this defendant, a jury held that it infringed the two U.S. patents at issue. In July 1996, the court granted, among other things, its subsequent motion for judgment as a matter of law, overturning the verdict. Loral Fairchild Corporation appealed this decision to the Court of Appeals for the Federal Circuit and oral argument was held in June 1997. In June 1999, the Federal Circuit affirmed the district court’s claim construction and its non-infringement decision. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In July 1992, Matsushita Electronics Corporation
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Management is of the opinion that, based on the information currently available, any outcome of these actions against Matsushita will not have a material adverse effect on Matsushita’s operations or financial position. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
There are a number of other legal actions and administrative investigations against
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Item 9. The Offer and Listing
The primary market for the Company’s | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ADRs agent(s). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table sets forth for the periods indicated the reported high and low sales prices of the Company’s Common Stock on the TSE, and the reported high and low sales composite prices of the Company’s ADSs on the NYSE: |
Tokyo Stock Exchange | New York Stock Exchange | |||||||||||||||
Price per Share of | Price per American | |||||||||||||||
Common Stock (yen) | Depositary Share (dollars)* | |||||||||||||||
Fiscal Year ended March 31 | High | Low | High | Low | ||||||||||||
1998 | 2,520 | 1,750 | 21.10 | 13.51 | ||||||||||||
1999 | 2,375 | 1,640 | 19.50 | 12.80 | ||||||||||||
2000 | 3,320 | 2,050 | 30.30 | 17.35 | ||||||||||||
2001 | 3,190 | 1,932 | 29.90 | 16.00 | ||||||||||||
2002 | 2,360 | 1,398 | 19.43 | 11.14 |
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Tokyo Stock Exchange | New York Stock Exchange | ||||||||||||||||
Price per Share of | Price per American | ||||||||||||||||
Common Stock (yen) | Depositary Share (dollars)* | ||||||||||||||||
Fiscal Year ended March 31 | High | Low | High | Low | |||||||||||||
2001 | |||||||||||||||||
1st quarter | 3,070 | 2,410 | 29.28 | 22.65 | |||||||||||||
2nd quarter | 2,995 | 2,660 | 28.18 | 25.05 | |||||||||||||
3rd quarter | 3,190 | 2,430 | 29.90 | 22.13 | |||||||||||||
4th quarter | 2,800 | 1,932 | 25.25 | 16.00 | |||||||||||||
2002 | |||||||||||||||||
1st quarter | 2,360 | 1,901 | 19.43 | 15.35 | |||||||||||||
2nd quarter | 1,960 | 1,402 | 15.92 | 11.50 | |||||||||||||
3rd quarter | 1,697 | 1,398 | 13.89 | 11.60 | |||||||||||||
4th quarter | 1,826 | 1,482 | 14.50 | 11.14 | |||||||||||||
2003 | |||||||||||||||||
1st quarter | 1,787 | 1,528 | 14.64 | 12.13 | |||||||||||||
Most recent 6 months | High | Low | High | Low | |||||||||||||
January, 2002 | 1,815 | 1,623 | 13.70 | 12.35 | |||||||||||||
February, 2002 | 1,725 | 1,482 | 12.83 | 11.14 | |||||||||||||
March, 2002 | 1,826 | 1,573 | 14.50 | 12.21 | |||||||||||||
April, 2002 | 1,749 | 1,576 | 13.66 | 12.13 | |||||||||||||
May, 2002 | 1,787 | 1,628 | 14.64 | 12.76 | |||||||||||||
June, 2002 | 1,783 | 1,528 | 14.47 | 12.51 |
* | The prices of American Depositary Shares are based upon reports by the NYSE, with all fractional figures rounded up to the nearest two decimal points. The prices of ADSs, prior to the December 11, 2000 ADS ratio change, have been restated on the
|
B. | Plan of Distribution | |
Not applicable |
C. | Markets | |
See Section A of Item 9. |
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D. | Selling Shareholders | |
Not applicable |
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E. | Dilution | |
Not applicable |
F. | Expenses of the Issue | |
Not applicable |
Item10.Additional Information
A. | Share Capital | |
Not applicable |
B. | Memorandum and Articles of Association | |
Organization | ||
The Company is a joint stock corporation(kabushiki kaisha)incorporated in Japan under the Commercial Code(shoho)of Japan. It is registered in the Commercial Register(shogyo tokibo)maintained by the Moriguchi Branch Office of the Osaka Legal Affairs Bureau and several other registry offices of the Ministry of Justice. | ||
Objects and purposes | ||
Article 3 of the Articles of Incorporation of the Company provides that its purpose is to engage in the following lines of business: |
1. | manufacture and sale of electric machinery and equipment, communication and electronic equipment, as well as lighting equipment; | |
2. | manufacture and sale of gas, kerosene and kitchen equipment, as well as machinery and equipment for building and housing; | |
3. | manufacture and sale of machinery and equipment for office and transportation, as well as for sales activities; | |
4. | manufacture and sale of medical, health and hygienic equipment, apparatus and material; | |
5. | manufacture and sale of optical and precision machinery and equipment; | |
6. | manufacture and sale of batteries, battery-operated products, carbon and manganese and other chemical and metal products; | |
7. | manufacture and sale of air conditioning and anti-pollution equipment, as well as industrial machinery and equipment; |
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8. | manufacture and sale of other machinery and equipment; | ||
9. | engineering and installation of machinery and equipment related to any of the preceding items as well as engineering and performance of and contracting for other construction work; | ||
10. | production and sale of software; | ||
11. | sale of iron and steel, nonferrous metals, minerals, oil, gas, ceramics, paper, pulp, rubber, leather, fibre and their products; | ||
12. | sale of foods, beverages, liquor and other alcoholics, agricultural, livestock, dairy and marine produces, animal feed and their raw materials; | ||
13. | manufacture and sale of drugs, quasi-drugs, cosmetics, fertilizer, poisonous and deleterious substance and other chemical products; | ||
14. | sale of woods and other construction materials and general merchandise; | ||
15. | motion picture and musical entertainment business and promotion of sporting events; | ||
16. | export and import of products, materials and software mentioned in each of the preceding items (other than item 9); | ||
17. | providing repair and maintenance services for the products, goods and software mentioned in each of the preceding items for itself and on behalf of others; | ||
18. | provision of information and communication services, and broadcasting business; | ||
19. | provision of various services utilizing the Internet including Internet access and e-commerce; | ||
20. | business related to publishing, printing, freight forwarding, security, maintenance of buildings, nursing care, dispatch of workers, general leasing, financing, non-life insurance agency and buying, selling, maintaining and leasing of real estate; | ||
21. | investment in various businesses; | ||
22. | accepting commission for investigations, research, development and consulting related to any of the preceding items; and | ||
23. | all other business or businesses incidental or related to any of the preceding items. |
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Directors | ||
Under the Commercial Code, each Director has executive powers and duties to manage the affairs of the Company and each Representative Director, who is elected from among the Directors by the Board of Directors, has the statutory authority to represent the Company in all respects. Under the Commercial Code, the Directors must refrain from engaging in any business competing with the Company unless approved by the Board of Directors and any Director who has a material interest in the subject matter of a resolution to be taken by the Board of Directors cannot vote on such resolution. The total amount of remuneration to Directors and that to Corporate Auditors are subject to the approval of the general meeting of shareholders. Within such authorized amounts the Board of Directors and the Board of Corporate Auditors respectively determine the compensation to each Director and Corporate Auditor. | ||
Except as stated below, neither the Commercial Code nor the Company’s Articles of Incorporation make special provisions as to the Directors’ or Corporate Auditors’ power to vote in connection with their compensation, the borrowing power exercisable by a Representative Director (or a Director who is given power by a Representative Director to exercise such power), their retirement age or requirement to hold any shares of capital stock of the Company. The Commercial Code specifically requires the resolution of the Board of Directors for a company to acquire or dispose of material assets; to borrow a substantial amount of money; to employ or discharge from employment important employees, such as corporate executive officers; and to establish, change or abolish material corporate organization such as a branch office. The Regulations of the Board of Directors of the Company require a resolution of the Board of Directors for the Company to borrow a large amount of money or to give a guarantee in a large amount. There is no written rule as to what constitutes a “large” amount in these contexts. However, it has been the general practice of the Company’s Board of Directors to adopt a resolution for a borrowing in an amount not less than 10 billion yen or its equivalent. | ||
Common Stock | ||
General | ||
Set forth below is information relating to the Company’s Common Stock, including brief summaries of the relevant provisions of the Company’s Articles of Incorporation and Share Handling Regulations, as currently in effect, and of the Commercial Code of Japan and related legislation. The discussion of the Commercial Code below reflects certain amendments to the Commercial Code, which became effective on October 1, 2001 (the “2001 Amendments”) and April 1, 2002 (the “2002 Amendments”). | ||
In order to assert shareholders’ rights against the Company, a shareholder must have its name and address registered on the Company’s register of shareholders, in accordance with the Company’s Share Handling Regulations. The registered beneficial holder of deposited shares underlying the ADSs is the Depositary for the ADSs. Accordingly, holders of ADSs will not be able directly to assert shareholders’ rights to the Company. | ||
Authorized capital | ||
Article 5 of the Articles of Incorporation of the Company provides that the total number of shares authorized to be issued by the Company is four billion nine hundred and fifty million (4,950,000,000) shares. |
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As of March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The 2001 Amendments eliminated the concept of “par value” of shares of capital stock. Thus, all shares of capital stock of the | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Articles of Incorporation of the Company provide that the accounts shall be closed on March 31 of each year and that dividends, if any, shall be paid to shareholders, beneficial shareholders and pledgees of record as of the end of such day. After the close of the fiscal period, the Board of Directors prepares, among other things, a proposed allocation of profits for dividends and other purposes; this proposal is submitted to the Board of Corporate Auditors of the Company and to independent certified public accountants and then submitted for approval to the ordinary general meeting of shareholders, which is normally held in June each year. In addition to provisions for dividends, if any, and for the legal reserve and other reserves, the allocation of profits customarily includes a bonus to Directors and Corporate Auditors. In addition to year-end dividends, the Board of Directors may by its resolution declare a
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